Revenue Generating Logic of Social Network Sites: A Comparative Evaluation

Social network sites (SNSs) create many opportunities for businesses by preparing a context for interaction between the users and their participations in generating content. Like any other business, these networks require logic to increase value creation and revenue-generating. However, not a single logic can be suggested for all. This paper examines the revenue-generating logic of different types of SNSs. For this purpose, this study attempts to find answers to the following three questions: 1) What are the distinguishing characteristics of different social network sites? 2) How can they create value and generate revenues? and 3) How the differences between them affect their business logic?

Comparative evaluation is used for analyzing the revenue-generating of SNSs. Accordingly, a framework was developed for comparing four different types of SNSs. This proposed framework has two layers; a) the basic logical layer of relationship-content for classifying the social network sites and b) the business logic layer as the logic for comparing different types of sites.

SNSs can earn money via ads, premium subscriptions, selling additional services and products, and funding. However, considering the nature of these sites, some changes are made to the form of applying revenue-generating techniques and their priorities to make them consistent with their competitive advantages.

SNSs can bring real value and generate money only when they can provide a free and attractive context for effective participation; in other words, when a group of users can provide another group(s) with relationships and content of interest. As the number of users increases in these sites, the attractiveness of ads matched with their types as a source of revenue is also increased. However, as we move toward more professional sites, it is the relationships between the users that have a higher value, and based on that, professional and job-related revenue-generating strategies are more commonly used. But, as we approach more specialized sites, the value of the shared content increases and revenue-generating strategies change and become more in line with specialized content on the site. Furthermore, although the specialized or professional nature of these types decreases their potential number of users, they can increase the potential of revenue-generating by developing professional relationships and organizing the specialized and rich content; and use of additional products sales and services and premium subscription strategies (matched with their nature of relationships and content). These types can also earn money via funding due to presenting new ideas in different specializations. The results of this study can be useful for the existing and new social network sites for developing their businesses.