Social networking is a daily activity for most of us. Anyone paying attention knows that sites like Facebook and Twitter have hundreds of millions of users and are extremely popular. But one thing I think we all forget from time to time is that these social networking sites are businesses. They do have employees and they do have costs. So I ask again, how do social networks make money?
The short answer is that they don't, not on their own at least – at first. There are a few different ways social networking sites earn money, with more on the horizon. This article aims at uncovering a few of these methods and answering the questions that many of us are asking.
Venture Capital
First things first, most (if not all) social networks start with funding from venture capitalists. Investors are willing to take a risk on a company if they think it can be profitable in the future, so they invest early and hope for a huge payoff down the road.Facebook is a great example of this. We already know how Facebook originated and how it works, but how does it make money? It all started with venture capital (VC). How Did Facebook Originate?
The same goes with Twitter. Twitter and Facebook have each raised several million dollars in venture capital. The goal is to either monetize the company or sell it to a large corporation for an even bigger profit. Monetizing can prove difficult, which leads me to my next revenue stream.
