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Twitting Money

Big online news stories at the moment all seem to be about getting hold of the gold at the end of the rainbow from new media web portals.

In terms of pure visitor numbers the likes of YouTube, Facebook and Twitter are undoubted giants of the internet but all are yet to successfully convert their popularity into commercial gain.

YouTube for example is predicted to have 375 million unique visitors in 2009 by Credit Suisse but the Google owned video streaming site is also predicted to make a loss of $470m by the same banking organisation.

Not the idea ecommerce model!

Making money from sites such as YouTube, Facebook etc. is immediately hampered by their high running costs. If you have millions of visitors requesting video or interactive features you need lots of servers and lots of broadband capacity.

Going back to the YouTube figures, Credit Suisse calculates that it will spend $360 million on bandwidth costs this year because of 75 billion video stream requests.

The other side to the uneven equation is the lack of commercial leverage. YouTube gets money from in-video ads and from broadcasters to host their content. But this has so far been more limited than expected and disagreements have resulted in many content providers pulling out of deals.

Meanwhile, Twitter is just embarking on tentative steps to commercialise its offering. This exercise will be fascinating to watch as Twitter is arguably a more restricted format than YouTube.

And then there is the dirty phrase in social media of ‘paid-for services’. Whispers have started up about Facebook possibly becoming a paid for site if bought out.

This is the most direct form of leveraging income as it charges the user not partner advertisers and in theory it could deliver huge incomes. However, sites would take a big gamble with this strategy. Social media users seem to hold strongly to the idea that they should be free to the end user and are likely to, at worst rebel and boycott, at least drift away to a free rival. Look at friendsreunited.com for an example.

No doubt Google bought YouTube for $1.65 billion with an eye to raking in the revenue. Facebook was similarly valued (at one point last year) at $15 billion based on theoretical commercial value.

The reality is social media have yet to deliver a successful commercial model. Can it be done? And who will be the first to succeed?

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