Why should social networks want to make money?

In a guest column today over at VentureBeat, Amuso co-founder Barak Rabinowitz writes about the failure of social networking websites to turn their phenomenal popularity into phenomenal profits.

“There’s an elephant in the room of online advertising,” he suggests.  “An elephant in the shape of 400 million social networkers creating and consuming content, clustering around shared interests and activities — all who have yet to be tapped in any major way by web marketers.”

I’m not so sure how much of an unacknowledged elephant this is, since the failure of Facebook et al to make any real money seems to be the major issue in the Valley right now.

But try thinking about it from the user perspective.  Maybe the huge growth in social networking is precisely because we users aren’t feeling hit over the head by marketing messages when we are networking — yet.

Indeed, Rabinowitz acknowledges this himself: “The bad news for all social networking sites — video portals especially — is that users generally don’t have the mentality to view and click on ads when they are on these platforms.”  Dang right.

No wonder social sites are treading very slowly in ‘monetizing’ their operations.  When it comes to social media, after all, the cost of entry is so low that if you piss off your users, someone else can create a rival site in a day.

But is that such a problem, really?  Even if it was simply impossible to profit from social networking in the way that Google profits from search, would that be a reason not to create social networks?  Well, no.

Sure, operators need to pay for their bandwidth and servers etc., but it’s possible to do that without making profit your primary goal — look at Wikipedia.   So why should having millions of users mean you have to seek mega-profits?  What’s wrong with not monetizing something that’s hugely popular for once?  Millions vote in the US elections, after all, but no-one thinks that its a shame that they’re not marketed to in the election booth (at least not yet).

Maybe it’s good enough to feel proud that you created something elegant and useful and self-sustaining.

There’s also an interesting issue of competition here — when you use a social network you are making decisions about how to project your identity.  Put crassly, you’re essentially engaging in a marketing operation, much as you are when you choose what clothes to wear when you go outside in the morning, or when you decide to get a haircut (or not).  I think most people understand on some level that their social networking actions are marketing themselves and having someone else add a layer of conventional marketing over what you are trying to do means the site that’s supposed to be helping you is in competition with you, too.

Andrew Chen recently made a mock up of what Facebook might look like with banner ads.  It’s hideous.  I’d run straight from it to the rival that would inevitably spring up the next day, joined I’m sure by tens of millions of others.

Could it be that social networks don’t really want to be monetized?  If information wants to be free, maybe friendships want to be free, too.

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