All about Social

Networking Sites(SNS)

Whitepaper by Koncept Konquerors

Group -3
Divyan Kavdia (09BM8017)
Swati S. Arora (09BM8032)
Saurabh Mishra (09BM8045)
Kumar Priyadarshi (09BM8069)
All About Social Networking Sites (SNS) Page 1
 Contents
Introduction 2

History 2

Social Networking Models 3

Major Players 4

Social Implication of SNS 4

Revenue Models 5

1) Advertising Model 5

2) Subscription Model 5

3) Transaction Model 6

References 7

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 Social Networking: What is in it for you?

Introduction
Social Networking has been constantly evolving in many forms for nearly a decade, but the
tremendous ballyhoo in past few years has raised the involvement substantially.

The entire concept of SNS revolves around the very basic attribute of human nature to form
groups. People tend to form small or big groups in personal and professional life, this
construct acts as the keystone of SNS. SNS have germinated from being ‘fun’ activity for
school/college kids to being host for a varied scoped activities ranging from people finding,
advertising, transacting, knowledge sharing, recruiting and various other business
applications. To many a people SNS are like a ‘Third place’ other than office and home
where they can perform a whole range of activities which they only dreamt of in the real
world.

SNS take many forms and their creation may be based out of different reasons like finding
friends to doing business, but in-spite of all these diversities there are a few attributes like
profile building, connecting and expressing emotions which remain common in all forms of
SN.

History
With the World Wide Web gaining public face in the 90’s came into existence the concept of
online interactions. Bulletin Boards, Chat Rooms & Emails were the very first form of online
communities which people used to share personal information and knowledge. Along with
this came the technique of publishing the web page to make the internet users know about
you which heralded the blogs like WordPress, Blogger and many more. With Classmate.com
came the idea of virtual reunion. Then came SixDegrees.com which brought the concept of
profile building, inviting friends, organizing groups and surfing other people’s profile.
AsianAvenues.com brought with it the concept of niche, demographic driven market. Within
few years of advent of 21st century came into existence the concept of ‘Circle of Friends’ and
thus came into existence Friendster, LinkedIn, MySpace, Facebook , Orkut, Twitter etc.

Rising fame of SNS aroused the interest of Business community and thus started an era of
online advertising and various other business oriented features and sites. Till now the basic
attributes of SNS like profiles, identity building, community building, network building, self
publishing etc keep bringing lot of traffic to these sites and people are enthralled by Web 2.0.
Addition of Google Wave, Buzz etc proves the point that the field is in growth phase and we
can expect a lot of new features and concept related to Social Networking like GoJiyo.com
and many more coming to us in near future.

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 Figure 1: Evolution of Social Networking Sites

Social Networking Models

Right from profile building & inter-connecting to blogging, uploading pictures/videos and
tagging and commenting on them, micro blogging to tell your network of friends what you
are up to at the very current moment etc everything is so lively that one cannot separate
himself from the roots of SNS. From online dating to listening your favorite music on
demand, everything is so youthful, so refreshing that one cannot hold himself out of this
rapidly evolving ‘Third Place’. The following Figure presents the breakup of what the SNS
users are doing the most on these sites

Figure 2: Percentage of Users using various features of SNS[1]

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Major Players
There is plethora of SNS available on the web. Some offer pretty generic platform and
have mass appeal, while some offer customized platform for a niche segment. Here we
will talk about all these in brief.

Target
SNS Type Prominent feature
Audience
Facebook All Generic Wall Post, Applications, Embedded
Videos and Photos, Chat.
MySpace All Generic Updates, Applications, Embedded Videos
and Photos, Chat, Celebrity Updates.
Twitter All Generic Micro blogging, Status updates in 140 or
less characters.
Orkut All Generic Scrap, Applications, Videos and Photos.
LinkedIn Working Niche Recommendations, Refer employee.
Professionals
Bebo All Generic Personalized Homepage, Built-in Skype,
Video Sharing
Ning All Generic Create your SNS
Smart.fm All Niche Japanese and English learning social
website
Figure 3: Major Players
Almost all of these SNS are generic in nature. They provide personalized homepage, direct
ways to interact with friends (wall post, scrap), video sharing, photo sharing and various
applications. Personalized Homepages are the vivid example of Web 2.0. A user homepage is
determined by his/her friend’s news feed, his interest and so it is dynamic in nature.

These are only the major players but there is only one ultimate player: You. Since you
created this (by using these SNS) and you play this (by providing content on regular basis),
no one can be the ultimate player except you.

Social Implication of SNS

Thomas L. Friedman has considered Netscape (/Web) a flattener in his famous book “The
world is Flat”. Basically, I believe SNS are the ones that really provide level playing field.
Everyone, be it famous or notorious, rich or poor has a Social profile on any of the SNS.
They all feel need to be in touch with their peers, their fans. Famous celebrities tweet about
how they are stuck in Jam, they blog about their endeavors – they all want to be in direct
contact with their fan base. And what can be better medium than SNS which provide
inexpensive, effective, personalized and have mass reach.

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 These sites fulfill a very basic need of humans: the need to communicate, to talk and to
express their feelings. People living in corners are seen to be getting married, friends from
distant past are able to keep in touch with each other and lovers from North Pole and South
Pole feels their voices through these SNS’s. These help us make new friends, stay in touch
with the old ones and let us know more about the persons we care: their likes, dislikes,
interests and emotions and their above all them as a person. Besides that, Youth is now more
and more connected to social issues, they voice their opinion through these sites. Although
there is element of addictiveness, these sites are becoming the way of living.

Revenue Models
The Revenue models for SNS can be categorized into three types:
(1) Advertising model
(2) Subscription model
(3) Transaction model

1) Advertising Model
This model makes money from the companies who wish to advertise their products or
services on the website. The sites may either put up banners of these companies or redirect
the traffic to a particular website in which case they receive a referral fee or a percentage of
resulting revenue.

The existing users generally do not mind advertisements to a certain extent. They consider it
as a price they have to pay to get access to all the free content. To be profitable, these
websites need to have a large number of user bases. For this, increasing awareness through
advertisements is important. Another very prominent way to increase the user base is through
recommendations of the existing users.

Some numbers in Perspective: [2]

Social networking site (SNS) MySpace accounts today for about 80.8 percent of overall SNS
traffic. According to eMarketer, in terms of advertising revenue, on any given day this
accounts for approximately 57.9 percent of all SNS advertising revenues.

In the U.S. alone, overall advertising spending on social networks as a proportion of total
online ad spending is expected to increase from about 2.14 percent last year to 6.82 percent in
2011

2) Subscription Model
This Model generates revenue when users subscribe to a service or a product provided by the
site. In this model, user’s willingness to pay is the most critical factor. This in turn depends
on the quality of the offering.

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 Figure 4: Revenue models and their drivers [2]
Users will pay for a service only if they derive some value out of it. Creating value for
consumers is the key issue here. A majority of content can be generated through an extensive
user interaction. Users should have access to a lot of groups, forums etc. Thus more the
activities on a SNS, more the content generated. Facebook for example has been able to
generate a lot of content owing to its applications. In this model, usually a basic offering is
provided for free whereas an extended version is charged for.

3) Transaction Model
In this model, a site earns revenue by carrying out various transactions for the user. The
transactions can be exogenous or endogenous. Endogenous transactions are the ones in which
a sites sells its own product or services. For example, Facebook sells small gifts online. Since
the contribution of each sale is not very high, the volume is required to generate enough
money. For this a large user base is important. Exogenous transaction is the one in which a
site sells third party product or services and earns a percentage of the sales.

A very important parameter in this model is the user’s trust in the platform as well as the
peer. Enough privacy and security settings should be provided to the user to build the same.

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 Usually, no site uses a single revenue model. It is a combination of models in most cases.
Below is the list of popular networking sites and the models they use to generate revenue:

Figure 5: Revenue models for various Web 2.0 SNS[3]

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References

[1] http://ccc.georgkolb.com/wp-content/uploads/2008/05/content-posted-on-social-
network.jpg

[2] www.signalversusnoise.com

[3] Albrecht Enders , Harald Hungenberg, Hans-Peter Denker, Sebastian Mauch.

The long tail of social networking. Revenue models of social networking sites. Strategic
Management, University of Nuremberg, Lange Gasse 20, 90403 Nuremberg, Germany

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