April 7, 2010
Since the news broke that Bebo is in terminal decline, opinion formers have been asking: why did it fail?
Some, like The Times, have pointed towards a lack of monetisation through advertising. If we hold up the Facebook smart advertising model as the best commercial blueprint, this conclusion would make sense.
However, with recent results showing Facebook only just about breaking even, this news puts the spotlight on the premise that basic advertising can support social networks.
LinkedIn would argue against pinning revenue hopes on one channel, as it emulates the FT model of premium subscriptions. While this may sound like a more robust approach, the numbers still point to a deeper concern. If no one, apart from Amazon (which you can probably call a social network) and Facebook, has made a profit what does the future hold for the social media space?
Well, invariably the future holds a much stripped down and some would say cleaner universe of social media platforms. Sure, there will always be newer players like foursquare, Ning and Xing – but how will the ‘big three’: Facebook, Twitter and YouTube change over the next few years?
It seems as if Google will drive YouTube down the premium content route, as the recent deal with the IPL suggests, while Facebook is using targeted ads. So where does that leave Twitter?
Recently, Twitter hinted at an impending advertising platform. Whichever way it goes, pundits anticipate a revenue sharing model to motivate power users to ‘endorse’ a brand message. If Twitter goes down this path it will be interesting to see how it mitigates accusations of encouraging astroturfing.
In any event, Twitter doesn’t need to make a decision quickly. Last year it was reported that a Twitter funding round raised $100 million from VCs valuing the company at $1 billion. Although, with Bebo bought for $850 million by AOL two years ago, there is bound to be an increasing mood of caution in the Twitter investor meetings happening around San Francisco.