Business Models for SNS

21Mar10

Choosing the right business model for our internet start-up isn’t that easy. After reading an article in the Economist it was easier to compare business models. I realized that they could be combined to make the most of it.

First we have the cost-per-click model. Skeptics point out that the click-through rates on display ads on social network sites are rather low. However SNS are very popular for advertisers. The audience they can reach is very high and, more importantly, the ads can be targeted with laser-like precision because of all the information available on the SNS. On top of that, advertisers have a great return on investment. There could be a viral marketing effect when friends share their experiences about products or services. Research has shown that recommendations from friends have significant importance in purchase decisions.
From: The Economist

A second model we will implement is the subscription model. A basic profile will be free of charge but for an extended profile we will install a yearly fee. Chefs can upgrade their profile with, for instance, more photos and videos of their previous work. However, this subscription fee won’t influence the order of appearance of our search engine. The order will be determined by clients who give ratings. LinkedIn also uses the subscription model for premium services.

Another model we could use in the future is the Asian model. You can sell games, virtual goods, virtual gifts, custom backgrounds and other paraphernalia to personalise a SNS page. The American company Hi5 even introduced their own virtual currency, the Hi5 coins. Inside Network, a research company, estimated that sales of these virtual wares could grow to 1.6 billion dollar in 2010 in the United States.

For more information about these business models you can read the article on the following link: http://www.economist.com/specialreports/displaystory.cfm?story_id=15351026.

Laura

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