From David Beisel:
I believe the key for these endeavors is to fit into an existing revenue model applied elsewhere, be applicable across many niche demographics, and of course scale.
Couldn't agree more. There are thousands and thousands of websites that are able to virally produce traffic. But, that doesn't make them fundable businesses. The websites owned by businesses that know how to apply some kind of proven monetization method to that traffic are the ones that should be funded. If it can be applied to many niche demographics (ala weblogsinc or the friendfindernetwork), than the business can be big. And as David mentions, the business has to scale: grow without a lot of additional resources.
David says earlier in his post, these revenue models don't need to be advertising:
And while the largest social networks like MySpace are indeed media properties (and therefore ad supported), I think that it’s likely we’ll see other valid revenue models emerge as well, whether it’s transactional based, facilitating commerce, etc.
And the most important point he makes: Social networking sites with high traffic should be tapping external companies for revenue possibilities. And it's not rocket science. Media businesses make money in a variety of ways: advertising/marketing services, market research, commerce (including affiliate commerce), subscriptions, experiences/events. If there's a social networking website out there that doesn't have a component of each of these, there leaving something on the table. But, the chances are small that many of these social networking startups have the in-house expertise and capabilities to exploit all of these revenue streams. So, look outside.
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