I think you are missing the point. IMO, the key to making money is turning a community into an economy, where trade can take place and recognition can be given. In an economy, there are lots of ways to make money and build profitable businesses. And if you look at it from the perspective of turning communities into economies, it is not restricted to consumers, the young or anyone else for that matter.

If we segment the use cases for social networks, I think we will find different mechanisms to create economies.

Gaming: Virtual currencies obviously work great as a way of turning gaming environments into economies. Casinos in the real world use chips and make more money because they do. Second Life uses Linden Dollars to run it’s economy. XuQa uses Peanuts as it’s currency and is profitable. In this segment, the virtual currency reduces trading friction and creates a recognition system for users. Lots of money is being made by the bank in this segment.

Commerce: eBay is the best example in my mind of a community that has been turned into an economy. eBay uses real currency. But it enabled an economy to build by enabling trading mechanisms such as auctions, user ratings and PayPal to reduce trading friction and ensure efficiency in the market.

Specialist social networks: In this segment, I think there is a stronger argument for people being interested in buying things, but this type of social network is all over the web in the form of forums. There is every type of special interest forum imaginable on the web and the forum operators can make money advertising into these special interest groups. Just look at Internet Brands and you will see great example of this. Internet Brands is monetizing communities in automotive, home and travel segments. The thing that they are not doing is creating an economy where trade can take place, and I believe leaving money on the table. Perhaps the most interesting example to me of someone creating an economy in the specialist segment is Etsy.com which is focused on the handmade craft segment. In Etsy’s case, the creation of the economy is not about a virtual currency, but about combining a social community with a social marketplace.

B2B: I think in the B2B use case it may be more about using the social network to increase the effectiveness of the real world trading economy. Just look at the Quickbooks or SAP communities. They are big and active, and more importantly they increase trading efficiency by helping people who need help find providers who can provide it.

I could go on, but hopefully this clarifies the point that turning communities into economies can be a very effective way to create profitable businesses.

Alex

I remain unconvinced that there is EVER going to be a way of making real money on mainstream social networks and this ultimately affect their longevity. The sort of people who have spured their growth perceive they have an online chang out to play with friends - no one likes their personal spaces being invaded by salesman in the real world and so, I believe, will be the case online.

A much greater potential to make money from social networking is riding a forthcoming wave of specialist social networks, appealing to specific interest groups, such as sports or business. People on these will be more receptive to buying because the sellers can be much more relevant with their offers.

Creating a gimmick to try and engage the uniterested is NOT the way forward in my opinion.

Ian Hendry
www.wecando.biz