subject: How Social Networking Site Make Millions Of Dollars Every Year [print this page] When social networking sites start bubbling up on the Internet, people are mostly curious about them. Web users sign up to become members just to discover out how these sites work.
After a while of tinkering, a large number members start to realize the usefulness of social networking sites. They can use these sites to make new friends and connect better with their existing friends.
Just think about the a large number different ways they can connect with others on social networking sites. You can post your most recent photos, write a note about what you are doing and have all your friends read that very same note, send invitations to social events, etc. It's a great experience.
In the beginning, the social networking sites have little clue about which direction to head either. They just develop the tools and let the users chart out the direction on their behalf. But the take up rate was so good that a large number social networking sites start to take off. First, there was Friendster. Then there was Myspace and now, Facebook is the dominate player in this space.
While using these sites, Need it ever occurred to you how the social network sites make money? In fact, they are making millions of dollars every single year. How does that happen?
Enter the world of advertising. Advertising is great on the Internet. There are a large number forms of advertising you can choose from internet - pay per click, banner ads, text ads, rotating ads, targeted ads, etc. With the millions of members that these social network sites have, it's easy to monetize the traffic with just one method.
Facebook has chosen the text/banner advertising model. If you go to the Facebook site, you will see a column on the right that says something like "Sponsored ads". These are paid advertising. They look like innocent little widgets with texts written on them. But they are really hard cash making tools for the social network sites. How is hard cash being made?
There are two advertising models - cost per impression (CPM) and cost per click (CPC). If an advertiser chooses the CPM model, then he will be charged on an exposure basis. For every thousand impressions, he will be charged a certain amount of money. That means the more the ads are shown, the more the advertiser has to pay. Think about the billions of page impressions that Facebook has and it will start to dawn on you that this is a lucrative space to be in.
The second advertising model is CPC. Advertisers never pay for exposure, they pay for clicks. Every time someone clicks on an ad, the social network site gets paid. With millions of members, the number of clicks happening on the site must be staggering. This is how millions of dollars are made on social networking sites.
