Revenue Generating Logic of Social Network Sites: A Comparative Evaluation

Document Type : Original Article

Authors

1 Assistant Professor, Department of Management, Faculty of Humanities, Meybod University, Meybod, Iran

2 Assistant Professor, Information Technology Research Department, Iranian Research Institute for Information Science and Technology (IranDoc), Tehran, Iran

3 Associate Professor, Information Technology Research Department, Iranian Research Institute for Information Science and Technology (IranDoc), Tehran, Iran

Abstract

Aim: 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?
Methodology: 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.
Findings: 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.
Conclusion: 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.
 
 

Keywords


Afuah, A. & Tucci, C.L. (2003). Internet Business Models and Strategies: Text and Cases. New York, NY: McGraw-Hill, 2nd ed.
Al-Debei, M.M. & Avison, D. (2010). Developing a unified framework of the business model concept. European Journal of Information Systems, 19(3): 359-376.
https://doi.org/10.1057/ejis.2010.21.
Alexa Internet (2018). The top 500 sites on the web. Retrieved December 8, 2018, from:
https://www.alexa.com/topsites.
Allen, M. (2008). Web 2.0: An argument against convergence. Retrieved 23 December 2013, from: http://firstmonday.org/ojs/index.php/fm/article/view/2139/1946.
Anderson, C. (2009). Free: The future of a radical price. New York: Random House Business Books.
Bailey, K.D. (1994). Typologies & Taxonomies - An Inrtoduction to Classification Techniques. California: Sage Publications, Inc.
Bang, H.J. & Lee, W. (2016). Consumer Response to Ads in Social Network Sites: An Exploration into the Role of Ad Location and Path. Journal of Current Issues & Research in Advertising, 37(1):1-14. https://doi.org/10.1080/10641734.2015.1119765.
Belleflamme, P. ; Lambert, T. & Schwienbacher, A. (2014). Crowdfunding: Tapping the right crowd. Journal of Business Venturing, 29(5): 585-609.
https://doi.org/10.1016/j.jbusvent.2013.07.003.
Bickart, B.; Fournier, S. & Nisenholtz, M. (2017). What Trump Understands About Using Social Media to Drive Attention. Retrieved 11 December 2018, from:
https://hbr.org/2017/03/what-trump-understands-about-using-social-media-to-drive-attention.
Boyd, D.M. & Ellison, N.B. (2007). Social Network Sites: Definition, History, and Scholarship. Journal of Computer-Mediated Communication, 13(1): 210-230.
https://doi.org/10.1111/j.1083-6101.2007.00393.x.
Briggs, C. (2009). Web 2.0 Business Models as Decentralized Value Creation Systems. In: M.D. Lytras, E. Damiani, & P.O. de Pablos (Eds.), Web 2.0: The business model (pp. 37-52). New York: Springer.
Cha, J. (2013). Business models of most-visited U.S. social networking sites. In: A.B. Albarran (Ed.), The Social Media Industries (pp. 60-85). New York: Routledge.
https://doi.org/10.4324/9780203121054.
Chew, E.K. & Gottschalk, P. (2009). Information Technology Strategy and Management: Best Practices. Hershey, New York: Information Science Reference (an imprint of IGI Global). Retrieved from: http://www.igi-global.com/book/information-technology-strategy-
management/594&f=perpetual-access.
Cook, D. (2013). Candy Crush Saga at one: King reflects on a year of mobile dominance. Retrieved from: http://www.vg247.com/2013/12/16/candy-crush-saga-at-one-king-reflects-on-a-year-of-mobile-dominance/.
Crunch Base. (2014). ResearchGate Info. Retrieved 15 July 2014, from:
http://www.crunchbase.com/organization/researchgate.
Dasgupta, P. (2013). Evaluation of Revenue Model for Social Networking Sites and Implications. Journal of Marketing & Communication, 9(2): 10-18. Retrieved from:
https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=94590057&site=ehost-live.
Dawson, R. (2009). Implementing Enterprise 2.0: A Practical Guide To Creating Business Value Inside Organizations With Web Technologies. San Francisco, CA: Advanced Human Technologies.
DiMicco, J.; Millen, D.R.; Geyer, W.; Dugan, C.; Brownholtz, B. & Muller, M. (2008). Motivations for social networking at work. In: Proceedings of the 2008 ACM conference on Computer supported cooperative work (pp. 711-720). San Diego, CA, USA: ACM.
Elsevier. (2019). About Mendeley. Retrieved 12 January 2019, from:
https://www.elsevier.com/solutions/mendeley.
Enders, A.; Hungenberg, H.; Denker, H.P. & Mauch, S. (2008). The long tail of social networking. Revenue models of social networking sites. European Management Journal, 26(3): 199-211. https://doi.org/10.1016/j.emj.2008.02.002.
Facebook Inc. (2017). Facebook Annual Report. Retrieved 16 November 2018, from:
https://s21.q4cdn.com/399680738/files/doc_financials/annual_reports/FB_AR_2017_FINAL.pdf.
Falch, M. ; Henten, A. ; Tadayoni, R. & Windekilde, I. (2009). Business Models in Social Networking. In: CMI International Conference on Social Networking and Communities. Ballerup, Denmark.
Gaming, T. (2013). Candy Crush Saga - Revenue estimates, app rankings & ARPU. Retrieved from: http://thinkgaming.com/app-sales-data/2/candy-crush-saga/.
Gompers, P. & Lerner, J. (2001). The Venture Capital Revolution. Journal of Economic Perspectives, 15(2): 145-168. https://doi.org/10.1257/jep.15.2.145.
Hanafizadeh, P.; Zare Ravasan, A.; Nabavi, A. & Mehrabioun, M. (2012). A Literature Review on the Business Impacts of Social Network Sites. International Journal of Virtual Communities and Social Networking, 4(1): 46-60. https://doi.org/10.4018/jvcsn.2012010104
Henri, F. & Pudelko, B. (2003). Understanding and analysing activity and learning in virtual communities. Journal of Computer Assisted Learning, 19(4): 474-487.
https://doi.org/10.1046/j.0266-4909.2003.00051.x.
Hoegg, R. ; Martignoni, R. ; Meckel, M. & Stanoevska-Slabeva, K. (2006). Overview of business models for Web 2.0 communities. In: Proceedings of GeNeMe (pp. 33-49). Dresden.
Hu, X. (2011). Social Media Business Model Analysis - Case Tencent, Facebook, and Myspace. Aalto University. Retrieved from: https://aaltodoc.aalto.fi/handle/123456789/676.
Khasawneh, R.T. (2017). Social Media as a New Emerging Tool of Marketing. In:
W. Al-Rabayah, R. Khasawneh, R. Abu-Shamaa, & I. Alsmadi (Eds.), Strategic Uses of Social Media for Improved Customer Retention (pp. 1-10). Hershey, PA: IGI Global.
Kim, W. ; Jeong, O.R. & Lee, S.W. (2010). On social Web sites. Information Systems, 35(2): 215-236. https://doi.org/10.1016/j.is.2009.08.003.
Lee, I. (2011). Overview of Emerging Web 2.0-Based Business Models and Web 2.0 Applications in Businesses. International Journal of E-Business Research, 7(4): 1-16.
https://doi.org/10.4018/jebr.2011100101.
Linder, J. & Cantrell, S. (2000). Changing Business Models: Surveying the Landscape. Accenture Institute for Strategic Change. Retrieved 16 November 2018, from:
http://www.businessmodels.eu/images/banners/Articles/Linder_Cantrell.pdf.
LinkedIn Corporation. (2016). LinkedIn Annual Report. Retrieved 16 November 2018, from:
https://investors.linkedin.com/results-and-financials/annual-reports/default.aspx.
Magretta, J. (2002). Why Business Models Matter. Harvard Business Review, 80(5): 86-92.
Mir, I.A. (2017). Impact of Entertainment Motivational Drivers on User Acceptance of Online Social Network Banner Advertising : A Gratification Perspective. Zagreb International Review of Economics & Business, 20(1): 19-47. https://doi.org/10.1515/zireb-2017-0006.
Musiał, K. & Kazienko, P. (2013). Social networks on the Internet. World Wide Web, 16(1): 31-72. https://doi.org/10.1007/s11280-011-0155-z.
Nair, S. (2014). Why Facebook is a leading social media player. Retrieved 31 July 2014, from: http://marketrealist.com/2014/01/facebook/.
O’Dell, S. (2010). Opportunities and Obligations for Libraries in a Social Networking Age: A Survey of Web 2.0 and Networking Sites. Journal of Library Administration, 50(3): 237-251. https://doi.org/10.1080/01930821003634989.
O’Reilly, T. (2005). What Is Web 2.0. Retrieved 23 December 2013, from:
http://oreilly.com/pub/a/web2/archive/what-is-web-20.html?page=1.
OECD. (2007). Participative Web: User-Created Content. Organisation for Economic
Co-operation and Development (OECD). Retrieved from:
http://www.oecd.org/internet/interneteconomy/38393115.pdf.
Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation. New Jersey: John Wiley & Sons, Inc. https://doi.org/10.1523/JNEUROSCI.0307-10.2010
Ott, B.L. (2017). The age of Twitter: Donald J. Trump and the politics of debasement. Critical Studies in Media Communication, 34(1): 59-68.
https://doi.org/10.1080/15295036.2016.1266686.
Pateli, A.G. & Giaglis, G.M. (2004). A research framework for analysing eBusiness models. European Journal of Information Systems, 13(4): 302-314.
https://doi.org/10.1057/palgrave.ejis.3000513.
Porter, M.E. (1998). Competitive strategy: techniques for analyzing industries and competitors. New York: The Free Press.
Rappa, M.A. (2003). Business Models on the Web. Retrieved 15 July 2014, from:
http://digitalenterprise.org/models/models.html.
Rappa, M.A. (2004). The utility business model and the future of computing services. IBM Systems Journal, 43(1): 32-42. https://doi.org/10.1147/sj.431.0032.
Sankar, K. & Bouchard, S.A. (2009). Enterprise Web 2.0 Fundamentals. Indianapolis,
IN USA: Cisco Systems, Inc.
Shafiei Nikabadi, M. & Zarei, A.A. (2017). Effectiveness of Advertisements on Electronic Social Networks. Journal of Business Administration Researches, 9(17):149-173. [In Persian]
Shema, H. (2012). Interview with Richard Price, Academia.edu CEO. Retrieved 2 September 2014, from: http://blogs.scientificamerican.com/information-
culture/2012/10/31/interview-with-richard-price-academia-edu-ceo/.
Shu, C. (2014). Japanese Internet Giant Rakuten Acquires Viber For $900M. Retrieved 14 November 2018, from: https://techcrunch.com/2014/02/13/japanese-internet-giant-rakuten-acquires-viber-for-900m/?mod=article_inline.
Stabell, C.B. & Fjeldstad, Ø.D. (1998). Configuring value for competitive advantage: on chains, shops, and networks. Strategic Management Journal, 19(5): 413-437.
https://doi.org/10.1.1.120.9326.
Statista (2018a). Advertising revenues of selected social networks in the United States from 2015 to 2018 (in million U.S. dollars). Retrieved 16 November 2018, from:
https://www.statista.com/statistics/426520/us-social-networks-ad-revenues/.
Statista (2018b). Revenue of selected social media companies from 2014 to 2017 (in million U.S. dollars). Retrieved 16 November 2018, from:
https://www.statista.com/statistics/271582/revenue-of-selected-social-media-companies/.
Steininger, D.M. ; Wunderlich, P. & Pohl, F. (2013). Exploring competitive advantage of social networking sites: A business model perspective. In: 21st European Conference on Information Systems. Utrecht, the Netherlands.
Strickland, J. (2009). How do social networking sites make money? Retrieved 5 January 2014, from: http://computer.howstuffworks.com/internet/social-networking/information/how-social-networking-sites-make-money.htm.
Tweney, D. (2013). Bill Gates joins $35M round in ResearchGate to make science more open. Retrieved 8 May 2014, from: http://venturebeat.com/2013/06/04/researchgate-bill-gates/.
Twitter, Inc. (2018). Twitter Annual Report. Retrieved 16 November 2018, from:
http://www.viewproxy.com/Twitter/2018/AnnualReport2017.pdf.
Twitter, I. (2019). Ad targeting. Retrieved 17 January 2019, from:
https://business.twitter.com/en/targeting.html.
Vartiainen, P. (2002). On the Principles of Comparative Evaluation. Evaluation, 8(3): 359-371. https://doi.org/10.1177/135638902401462484.
Vascellaro, J.E. (2007). Social Networking Goes Professional. Retrieved 10 June 2012, from: http://online.wsj.com/article/SB118825239984310205.html.
Wang, Y. ; Tang, J. ; Jin, Q. & Ma, J. (2014). On studying business models in mobile social networks based on two-sided market (TSM). The Journal of Supercomputing, 70(3):
1297-1317. https://doi.org/10.1007/s11227-014-1228-4.
Weill, P. & Vitale, M. (2001). Place to Space: Migrating to Ebusiness Models. Boston: Harvard Business School Press.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2): 171-180. https://doi.org/10.1002/smj.4250050207.
Wilson, F. (2006). The Freemium Business Model. Retrieved 5 January 2014, from http://www.avc.com/a_vc/2006/03/the_freemium_bu.html.
Wu, A. ; DiMicco, J.M. & Millen, D.R. (2010). Detecting professional versus personal closeness using an enterprise social network site. In: Proceedings of the 28th international conference on Human factors in computing systems - CHI ’10 (pp. 1955-1964). Atlanta, Georgia, USA: ACM Press. https://doi.org/10.1145/1753326.1753622.
Zaugg, H. ; West, R.E. ; Tateishi, I. & Randall, D.L. (2011). Mendeley: Creating Communities of Scholarly Inquiry Through Research Collaboration. TechTrends, 55(1): 32-36.
https://doi.org/10.1007/s11528-011-0467-y.
CAPTCHA Image