Facebook and Twitter have helped make social networking a household word. Now they need to make money.
Efforts to monetize the popular Internet services are increasingly a priority within the two companies, with Facebook Chief Executive Mark Zuckerberg and Twitter Co-founder Biz Stone outlining several initiatives at the Reuters Global Technology Summit in New York this week.
And analysts and investors, in search of the next Google-like hit, are paying close attention to the breakneck speed at which Facebook and Twitter are adding new users.
While the popularity of the two social media firms has yet to translate into the kind of revenue-generating machine that Google Inc developed with its search advertising business, some say Facebook and Twitter have become so central to the Internet experience that they are inherently valuable.
"Both are new ways of communicating. And when you have a new way of communicating ... you benefit people enough so that there is going to be value there," said Tim Draper, managing director of venture capital firm Draper Fisher Jurvetson, noting that he regretted not having invested in either firm.
In April, Twitter's website attracted 17 million unique visitors in the United States, up sharply from 9.3 million the month before. Facebook grew to 200 million active users in April, less than a year after hitting 100 million users.
DIVERGENT STRATEGIES
Facebook sees advertising as its primary money-making strategy, said Zuckerberg, noting that the company could eventually offer ads not just on its own website, but on other sites that interact with Facebook.
Stone said Twitter was less interested in generating revenue through advertising than it was in offering premium features for commercial users of Twitter.
The divergent strategies underscore the novelty of social networking and the lack of an established business model.
Pacific Crest Securities analyst Steve Weinstein said advertising is probably the quickest way for social services to make money in the short term, but a purely ad-supported model does not take full advantage of the business opportunities created by social media.
"The amount of real-time information being created by Twitter is unparalleled," he said. Creating a better way to filter that information has great business potential, he said.
Because the value of social media sites improves as they become larger, Weinstein said the important thing now is for Facebook and Twitter to grow their networks and tread carefully with any monetization efforts that might inhibit that growth.
"The last thing you want to do is rush monetization and kill the golden goose," said Weinstein.