5 Business Models for Social Media Startups 1

Are you looking at social media startup opportunities? How are you going to make money?

There’s a good practical list of Five Common Business Models for Social Media Startups by Jun Loayza on Mashable. A good reminder that business models–how you get paid–are part of the game. All five will seem familiar: There’s freemium (give a standard version free, charge for more users or more features), affiliate, subscription, virtual goods (add-ons to free games, like swords and shields and such), and the old standard, advertising.

Facebook, for example, uses advertising to get revenue, and gets relatively little per user. There are a lot of freemium sites, and fewer examples of affiliates and subscriptions.

One of the business plans I reviewed recently had an interesting explanation of why freemium wouldn’t work, and it went subscription only. I worry about that, because there are so many fremium sites.

There’s another common model that this list doesn’t include: Raise investment money, get traffic but no money, raise more money, increasing valuation, get more traffic, raise more money . . . all in the hope that there’s money at the end, when some bigger venture acquires all the stock. Actually, I think we need a tricky word for that business model . . . kite-up? Musical shares? I like that one, because, so often, whoever gets caught with the shares at the end loses.

(Image: Flickr cc image by Chego101)

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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