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New Social Networking Revenue Stream?

Posted on 4.18.2007

In-Stat has published a new online report about social networking and their ideas for new revenue.

"In order for a social networking site to be successful, it must attain a critical mass, and competition is fierce to attract new members," says Jill Meyers of In-Stat. "So far, sites have focused their attention on a younger demographic, which is finite, fickle and limited in expendable income."

So how are these sites to make money on an audience with limited income?

The answer may lie with the users themselves. "Each social networking site collects a plethora of personal and demographic data on each member," said Meyers, "and while selling these data to target marketing groups may be unappealing to site members, it may be the best route to profitability for site operators."

It's an interesting and dangerous proposition. Social networking mavens have made their opinions clear in the past, regarding intrusive advertising on their favorite sites. It's one reason why many sites have been wary of advertising and slow to take advantage of the massive advertising potential. As social networking gives a feel of "ownership" to site members, many worry that advertisements are viewed as an invasion of privacy and a risk to driving away members to other sites. So what happens when savvy users find out that their favorite sites are selling their personal information to third party vendors? To a site like MySpace, it's probably less of a concern but to smaller, burgeoning sites it could pose a serious risk to attracting new users - and keeping them.

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