I used to belong to a great little community called PGL (pregame lobby). As a discussion site for gamers, PGL does a good job of providing a place to find a Halo pick up game, drool over the latest XBox 360 release, and meet like-minded adults who love interactive entertainment. Site users can advance to different levels on their profile depending on how many posts they have written, (ex/ in the lobby, on the couch, in the VIP lounge, etc.). Started by my co-worker and some of his friends, PGL grew to over 400 members before needing a new server to handle the traffic.
The site had a stickiness to it that made it fun to connect. But one thing that I am not sure PGL ever did was make money. They had ad space, but I am not sure if it paid space or just populated by friends. People would plug their online business or sell swag with the PGL logo, but as an enterprise it never reached the epic proportions that social media has the potential of reaching.
An article on Content Nation asks this very question: “where is the money in social media?” It says that a site like Facebook, which pulls in $450 million per year is small potatoes compared Yahoo’s $7 billion per year. Despite the seeming disparity, author John Blossom says that there is money in social media, which can be found in “building relationships that develop social transactions which in turn build into largely pre-sold transactions for goods and services.”
The monetization focus in social media has focused on advertising, which Blossom says has it’s place when endorsements are built based on real relationships, but he says “the essence of advertising is self-promotion in contexts that the advertiser doesn’t own.” Namely, the advertiser must give up control and let the community grow. Nothing strangles organic growth better than being smothered (see failed relationships…). Blossom gives the example of a good, organic consumer relationship by citing story of the Grateful Dead. The Dead encouraged their fans to tape their concerts and share them with each other (in direct violation of copyright) so that a community could (pardon the pun) blossom around the music.
It worked for The Dead and it could work for content providers, if they trust their consumers enough to let the magic happen. A last quotation from Blossom, “Where is the money on social media? It’s right at the tips of our fingers as each and every one of us becomes empowered to market ourselves and to build our personal brands.”