Monetization is a horrible word.
The term is necessary though as many online business models are based upon giving away a service or information for free. For those businesses to survive, they have to find a way to “monetize” their user base.
When Google were floated in 2003, the question was how could a free search engine “monetize” their users. The answer was in advertising and Google today are the world’s biggest advertising platform.
Facebook’s Inital Public Offering (IPO) announcement raises the same question; how does a company valued 99 times earnings find a way to justify the faith of its investors?
Advertising is the obvious answer but that seems to flattening out as the company’s revenue growth is slowing in that space. The AdWords solution tends to favour Google more than publishers as most advertising supported websites have found.
Partnering with application developers like the game publisher Zynga is another solution. Again though this appears to be limited in revenue and Zynga itself seems to be having trouble growing its Facebook user numbers.
So the question for Facebook is “where will the profits come from?”
There’s no doubt the data store Facebook has accumulated is valuable but how the social media service can “monetize” this asset without upsetting their users is open to question.
For Facebook the stakes are high as the comparisons with Friendster and MySpace are already being drawn.
We’ll see more partnerships like the Facebook Anti-virus marketplace, but these seem to be marginal at best.
In the next few months things will get interesting as Facebook’s managers and investors strive to find ways to make a buck out of a billion users who don’t pay for the service.
While “monetization” is an ugly word, it is one that every online company thinks about.
Every web based businesses will be watching how Facebook manage their monetization strategy closely as the entire industry struggles with the faulty economics of providing services for free.