Derek Powazek asks us to reconsider the business side of the social network:
Weâ€™re all desperately hoping that Twitter or Facebook or Tumblr will figure out the secret ingredient that turns a large-scale community of free members into a cash machine. What if weâ€™re all just waiting for the impossible?
While his general line of thinking is correct â€“ it is difficult to monetize social networks â€“ most of his examples are incorrect.
Facebook had a net income of $1 billion dollars in 2011.
No one knows whether Twitter is profitable or not. Some estimate it is, some estimate it could be, some estimate it can’t be. They’re a private company and are under no obligation to tell us which answer is correct. I’d place even money on “could be profitable if they chose to be”.
Tumblr’s essentially the same situation.
Social networks can be profitable. In fact, it seems the only thing holding any social network back from being profitable is a reluctance to introduce advertising. They hem, they haw, they try numerous experimental we-are-so-clever ideas before, ultimately, selling ads.
The cycle is so predictable it’s comical.
The notion that communities flee when advertisers enter is ludicrous, with counter-examples too numerous to document.
If it seems like most internet companies fail, you’re right; most businesses fail. It has nothing to do with any inherent problem with content sites, or social networks, or whatever other category of business seems to be the whipping boy du jour.