http://www.ecommercetimes.com/story/34422.html

In Online Social Networks and the Profit Motive, Elizabeth Millard explains entrepreneurs’ wariness in investing in social networks. How exactly does one advertise in an online social network? While financial analysts do see online social networks as promising markets, the question remains how to tactfully and efficiently advertise on such venues. “[Advertising on online social networks is tricky] because network members give personal information, they might flinch when that data results in targeted advertising,” Millard explains. Since targeted ads clearly result in some privacy concerns, online social networks began attempting to acquire revenue elsewhere. Additions of premium memberships (extra features for a monthly fee) became a profitable and ethical way to acquire revenue through social networks. Such a scheme works very well as these social networking sites can initially attract users with their free, basic features and then offer members more services at a cost. Additionally, free trial offers can be extended to the core members in hope that a taste of these new services will attract them to acquire premium memberships.

A different issue arises with online business networks. Business networking isn’t used to meet people with similar interests but rather to facilitate industry, and Millard explains how such networks must be treated differently then purely social ones. LinkedIn spokesperson Konstantin Guericke, when interviewing with E-Commerce Times told Millard, “The way our members look at the site is not as a community, but as a tool. Hammers don’t come with advertising, so why should we? You pay for your tools, and that includes business tools like databases and applications.” This brings up a very interesting point. Online networks seem to be categorized into those whose services, as deemed by the public, should be free (like MySpace or Facebook), and those that naturally should require payment (like LinkedIn and other technology tool sites). However, certain “social” online networks, like relationship finders, require a fee for their services. The fact that activities like sharing picture with friends on Facebook is deemed to be a free service, while matchmaking is not, elucidates a lot about the relative social importance of different networking venues and their underlying purposes.