The Economics of Social Networking

Jan 02, 2007

40% of the Internet traffic is attracted by 10% of online properties according to the numbers present at ReadWriteWeb. I reached this interesting post via a thought-provoking analysis at Rough Type. Nicholas Carr at Rough Type argues that not everybody on the Internet, especially the people who generate content for the social media websites, is interested in earning money on the net, or at least through social networking content. Their outlet is their earning. And people who provide the right tools to facilitate that output are the ones that make money.

Take for instance MySpace; 11% of the pageviews are generated by it. What makes it so popular (despite looking so awful)? It empowers people to create and then share content in whatever manner they want. It is not like the traditional media that creates content and then dumps it upon you. On websites like MySpace and YouTube people create content and people use it without much outside interference. The guys who manage these websites just provide the tools, and consequently, earn megabucks (YouTube was a few months ago bought by Google for apparently 1.6 billion dollars).

The micro content, upon aggregation, becomes macro content. Given the right platform, terabytes of consumable content can be generated by thousands of persons in a matter of a few minutes. Individually, it doesn’t matter much, as Nicholas says:

…the economic value of each of their individual contributions is trivial. It’s only by aggregating those contributions on a massive scale - on a web scale - that the business becomes lucrative.

Actually it’s a win-win situation for everybody. For instance a few weeks ago I recorded a video of my 16-month-old daughter dancing to my whistling. I wanted to share the video with a few relatives and friends who live in different countries and cities. So I uploaded the video to YouTube, generated the link and then sent the link to whomever I wanted. They not only loved the video, they commented on it, rated it, and my wife’s nephew posted a counter video from his place in just a few hours. This wouldn’t have been possible without YouTube. So I don’t give a damn how much money the guys at YouTube make because I upload my videos there, my payment was an ability to share it with many people.

Technorati Tags: social media, readwrite web, youtube, myspace