The NYTimes uses Twitter and Yammer as standins for its story about two business models duking it out in the aftermath of the market collapse: “build first and figure it out later” and “figure it now, then build.” Like most morality tales this one is exaggerated. Twitter hasn’t been particularly stupid. Between the dot.com bust and now a really huge monetization method matured: online advertising. Everyone has understood since the early 2000s that there’s an active market for eyeballs so building huge communities and then making money from advertising would seem to be a pretty sound strategy. And gee, Twitter has become a verb which ain’t such a bad track record. It faces two problems though.
The first is that we’ve come to realize that eyeballs aren’t enough. Seems obvious but you have to have a way to present effective advertising to people. The social networking sites really missed that one and are struggling to figure this out. The second is that the online advertising market is softening and has a decent chance of cratering. Companies cut back advertising when sales slow—there’s sound economics behind this; the payoff to advertising declines when demand softens so firms reduce it. My guess is that brand advertising and anything that isn’t tied to converting sales will get hammered. So Twitter isn’t Pets.com but it probably isn’t going to be like that other stinkingly wealthy verb anytime soon.
Then there’s Yammer which according to the NYTimes asks the question: “What are you working on?” and is a way for people to communicate about work. They charge companies $1 a head for their premium service, huh? I’m going to pay to have my workers spend even more time frittering away with communicating with each other rather than actually doing something. Then again, I’m old school: if someone gave me a big company to run I’d probably convert all the conference rooms to quiet offices and charge people for emails (I note—headhunters have not been calling). I guess I’ll check this one out—has anyone used it?
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Filed Under: Ad-Supported, Social Networks, Economics, advertising