Facebook has had a rough ride on the stock market since its IPO a few weeks ago. The stock has steadily declined while rumors of insider trading and other shady activities will not go away. However, just because Facebook had a poor showing on the stock market doesn’t mean all companies will suffer the same fate. How will other social media companies learn from the mistakes of Facebook?
Facebook Had A Hard Time Monetizing Its Product
Facebook was not in the business of creating anything tangible. Its value was in the users that provided personal information to marketers. What Facebook found out is that there is a limit to the information that people will voluntarily hand out. If the users don’t want to give unfettered access to their shopping preferences, it is hard to get advertisers to pay more money for ads.
Twitter Offers Sponsored Tweets
Twitter has attempted to overcome this issue by using sponsored tweets that come directly from the timeline of users. For example, if a user tweets about an energy drink, that energy drink company will place an ad in that timeline. These sponsored tweets are then seen by that person’s followers. It is more likely that someone will check out that product if they are legitimately interested in it. For example, a Charles Phillips news analysis may be something that is put in a sponsored tweet.
YouTube Merged With Google
YouTube is a popular video sharing service that is used by millions of people. Now that it is owned by Google, it has several monetizing strategies that it uses. Users can share playlists that they create themselves. They can be shared to other social media sites and users can also follow other users. Advertisements are then placed on the videos themselves. It is estimated that advertisements on YouTube can almost double revenues for products being advertised.
LinkedIn Offers Paid Subscriptions
LinkedIn users can pay for premium memberships. This is a direct way to monetize any social website. In fact, it is one of the few popular social networking sites that requires users to pay for access. Many social sites that require you to pay for access only ask you to pay for add-on features.
What Does This Mean?
What this all means is that Facebook simply has failed to properly market the activities of its users. Sites will have to either charge for access, better target advertisements to users who want to see them or merge with companies such as Google who know how to make money from advertisements. All three of these options can make a social company a better option to investors.
Social media is a great product that is revolutionizing society. Once the kinks have been worked out, there is no reason why these sites cannot make a lot of money for shareholders. In the meantime, companies will have to learn from the mistakes of Facebook. This should not be a problem as the failures of Facebook have already been highly publicized.