Week 4 - 5 Business Models for Social Media

Here was another take on the internet / social business models. The one that just boggles my mind is making money off of virtual goods. I know there are entire networks, games, second lives, etc. of people out there that live for this stuff, but that is just strange. I understand the concept of having an avatar or a character in a simulation or an ongoing game, like World of Warcraft, that you want to get upgrades for, but the little icons people send to each other through social media does not make sense to me. Why would I want a virtual $2 rose? Sometimes we have to get off the computer, even though it feels like we can't let it go.

I thought the "freemium" model was the way to go until I read that maybe only 5% of your customers will pay for the upgraded version. It is a very difficult line to walk. Your website needs to provide enough content that you get the users, and then you need something that is that much more of an incentive to switch to a higher paid version of your site. I agreed with the author, Jun Loayza; I will probably never pay for the premium version of LinkedIn because I don't see the benefit as of now.

The subscription model of Label 2.0 seemed to work. It was very similar to the "Freemium" model, or maybe the "Drug Dealer" model. They started with a concept for a business on the internet, gave it to the masses for free, got them hooked on it, then switched to a subscription. That would seem to work as long as you can retain your customer base, but you also need to see how you can entice new users in a way that they understand what they will get with the subscription and want more of it.

Overall, I thought this was a good article. I am impressed with the young entrepreneur who wrote this. It mentioned that one could reach him via his blog, but it looks like it is only updated on a monthly basis, which is a little puzzling.