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Can social networking sites earn money?

Experts worry that websites such as Facebook, Orkut and MySpace depend on advertising revenues and hardly have any planning for subscription revenues, reports Saurabh Turakhia.

india Updated: Apr 25, 2008 01:04 IST
Saurabh Turakhia

The youth bonding with various avatars of social networking such as Facebook and Orkut is quite well-known, even in India. However, the social networking space in India is yet to develop a feasible revenue model, feel experts.

Recently, MySpace, owned by Rupert Murdoch’s News Corp, announced its official launch in India, intensifying competition among major players including Facebook, Orkut and itself. MySpace boasts of 110 million monthly active users and claims that three lakh new people sign on everyday. It will be striking alliances with broadcasters and music companies in India as well.

Globally, US and other developed markets show a much denser reach of social networking but few charge users with membership fees. MySpace has spotted an opportunity in the Indian market. A MySpace spokesperson explains, “Until now, Indian advertisers were restricted to displaying advertising on portals, or performance-based advertising using search engines. With the power of social media advertising, however, they can use innovative ways such as hypertargeting to connect to their customers, thus helping them get better ROI.”

The outlook for social networking remains positive. According to a report by Forrester Research, enterprise 2.0 will become a $4.6 billion industry by 2013 and social networking tools will garner the bulk of the money. However, as things stand now, though there are enough players mushrooming, most market trackers are apprehensive about the commercial feasibility of social networking sites. The main reason why experts remain skeptical is that largely, all these sites are driven by advertising revenues, with hardly any subscription revenue earned. There are professional sites like LinkedIn which do charge for selling professional information and social connections to businesses, but most of them are busy acquiring more users by offering free membership and services.

The concern also is that hardly any innovations have happened in the space. Prasanth Mohanachandran, executive director – digital services, OgilvyOne Worldwide, India, observes, “The commercial implications are yet to set in. Barring early brand experiments like the Nike-Google or the Unilever Black Carpet competition on MySpace, most brands still have to see value beyond engaging with the youth who are primarily there for visibility.”

Of course, there are some serious players within India such as and Says Navin Mittal, business head of, “In India, increasing Internet penetration coupled with the growing awareness of the powers of the Internet is fuelling the growth of social networking. Social networking sites provide utility, community, entertainment, recognition and enterprise.” He is optimistic, saying that India’s Internet subscriber base is going to increase from 46 million at present to 100 million by the end of this year. Of the existing base, 11 million are hooked on to social networking. has been in existence for five years and claims a base of 3.5 million users. It gets both advertising and subscription revenues. claims a base of two million users and that it is adding 10,000 new visitors everyday. Google is trying to use the popularity of Orkut to execute targeted marketing. A Google spokesperson says, “We’ve recently begun a pilot test to include in our content network and show relevant ads targeted to the content of community pages. This pilot is being introduced to a very limited percentage of Orkut users around the world and we will pay close attention to their feedback as we continue to look for ways to improve the Orkut experience.”

Till now, in India, brands with a strong youth appeal have used social networking to promote themselves. Mohanachandran says, “On open social networks in India, mostly brands focussed around youth have advertised – Cadbury on Facebook. On closed social networks, mostly technology brands have been advertisers – Seagate on LinkedIn.” LinkedIn used to be a closed network, but is now open., with close to three million users, targets people from varied segments such as students in schools/colleges, fresh graduates, employees in corporates, young entrepreneurs, groups of artists/talented youngsters in different regions and the like. Vishnu Vardhan Induri, MD and CEO, Social Media India Ltd., which owns, says, “Bharatstudent derives its revenues through online advertising, targeted services and transactions.”

As a concept, social networking via the Internet is attracting a lot of attention. Revenue models are still to emerge with clarity. But in a country like India, where the sheer consumer numbers are a big attraction, online social networking cannot but remain attractive. The exciting thing is, revenue models can emerge out of anywhere in the world, so new is the online social networking endeavour.