Making Social Media Pay Off

Last week, my colleague Steven Baker wrote a cover story with the provocative question: What’s a Friend Worth?

The latest Internet dream was that social networks such as Facebook and MySpace, with all of their tons of user data, would create an advertising gold mine. But the answer, so far, is that despite the huge and growing amount of interest in social networks, your social friends are not worth that much. People are just not in a buying mood on social networks so they don’t click on those ads that often at all.

The good news is that that social networks are coming to grips with this hard realization and developing new ways to make money from all those friends–beyond advertising. The recent $200 million investment that Facebook received from Russian investment firm, Digital Sky Technologies, which says it has developed several profitable social networks, was driven in some part by the company’s expertise in generating non-advertising revenue.

Check out the rest of this post on BusinessWeek’s TechBeat blog, in which I talk about the new emerging business models of social media.

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