A Comparative Analysis of Online Social Networking Sites and Their Business Models

A Comparative Analysis of Online Social Networking Sites and Their Business Models

T. Andrew Yang, Dan J. Kim
DOI: 10.4018/978-1-60566-384-5.ch037
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In the world of e-marketing, new business models are introduced to accommodate changes caused by various factors, including the markets, the services, the customers, among others. One latest trend of e-marketing is social networking Web sites, many of which have attracted not only large number of users and visitors, but also business companies to place their online ads on the sites. As an important example of Web 2.0 applications, online social networks deserve comprehensive studying and analysis; they are not only employed as an effective vehicle of e-marketing, but may impact how future Web-based applications would be developed. In this chapter, we explore online social networking as a new trend of e-marketing, by conducting a comparative analysis of online social networking sites. We first discuss the various types of online social networks, based on the classification by Laudon & Traver (2008), and then analyze online social networks from a business strategy point of view, by discussing the primary revenue models for online social networking sites. The primary contribution of this chapter is a comparative analysis and discussions of representative online social networking sites and their respective revenue model(s). This chapter aims to provide the reader with a basic understanding of the emerging online social networking Web sites and their primary revenue models.
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Internet innovations have caused major changes in not only our personal lives, but also the ways that business and commerce are conducted. As reported by the Center for Media Research (2008), “… online sales excluding travel are expected to hit $204 billion in 2008, an increase of 17% over last year.” In e-commerce, the market is continuously changing and evolving, partly due to changes in the types of services and the underlying enabling technologies (among many other factors) (The Center for Media Research, 2008). The dynamic nature of e-commerce leads to the need for a dynamic business model. As argued by Reuver, Bouwman and MacInnes (2007), “In the turbulent world of e-business, companies can only survive by continuously reinventing their business models.”

Since its inception in the early 1990s, the Internet has witnessed tremendous innovations; many new Internet-based applications and services have emerged over the past two decades (Yang, Kim, & Dhalwani, 2007). Table 1 illustrates the progress of representative web-based services, from the early static web pages (early 90s) to today’s Web 2.0 applications, including online social networks and online collaboration websites. Also shown in Table 1 are the respective years of inception, example sites, and supporting tools for each of the representative services.

Table 1.
Evolution of web-based services
Web-based servicesApprox. year of inception    Example services / tools
1. Static Web SitesEarly 1990sThe first commercial web browser, Netscape Navigator, was launched in 1995.
2. Interactive Web Sites1995Java applets, Java scripts, VB scripts, …
3. Search Engines1995Lycos, Yahoo, …, Google (1998)
4. Discussion Groups1995Yahoo groups, Google groups
5. E-Commerce Sites1995Amazon.com, e-Bay, …
6. Online Social NetworksEarly 2000sMySpace (2003), LinkedIn (2003), Facebook (2004), Ning (2005), Flickr, YouTube, …
7. Online Collaboration SitesEarly 2000sWikipedia.org (2001)
8. Immersive Online 3-D Virtual Worlds2003Second Life (2003), There (2003), World of Warcraft (2004), Multiverse (2007), …

Key Terms in this Chapter

Online Social Networks: Social networking that occurs within virtual spaces in the Internet.

Social Networking: An inter-connected group of online users and/or user communities.

social networking sites: Websites that facilitate social networking among online users in various virtual communities.

Online business, e-business: Businesses that involve transactions made on the Internet.

Web 2.0: The next generation of web-based applications on the Internet, where collaboration and user-generated knowledge are commonly found.

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