Create a Social Networking Site and Monetize it

The Market

Social Networking sites like Myspace, Facebook, Linkedin and others are the buzz of the day.  But more than being the buzz of the day, they are the faster growing segment on the internet today.  Additionally, the founders of these companies seem to enjoy unprecedented wealth valuation in only a few short years.

Facebook Founder Mark Zuckerberg, at age 25, is now worth an estimated $2 billion and is now placed at #158 on Forbes list of wealthiest people in the world, according to Forbes.com.  He’s the youngest self-made billionaire ever since Forbes has started publishing this list.

According to Nielsen, a respected consumer and business research organization, in their March 2009 Social Networking Global report – Social Network grew twice as fast as email, search and any of the other popular online sectors.  Just think about that … I (and everyone that I know) use email and search everyday and cannot live without them on a daily basis.  But Social Networks grew twice as fast last year.

Nielsen also reported that ‘Time spent on Social Networks and blogs grew over 3 times the rate of overall internet growth’.

But is Social Networking mainly for crazy American teens, as some would suggest.  No, Nielsen reports.  Their report further concluded that ‘The greatest growth for Facebook has come from people aged 35-49 years’.  They also found that ‘The number of unique visitors who are 65 or older on social networking and blog sites has increased 53 percent in the last two years alone.’  Facebook is the #3 most visited destination for people who are over 65 years old, according to Nielsen.

I make these points to illustrate that we’re at the beginning of a global phenomenon… not the end.   That this could be a significant shift in how we communicate, network, and interact with each other on a local as well as on a global basis.  But this is not just an American phenomenon.   Germany had the ‘strongest growth’ for online communities according to Nielsen.  The UK, Spain, Italy and Switzerland also had very strong growth, according to Nielsen.

The Opportunity

Given the above facts, one may ask themselves, ‘is it possible to create a similar site or business to take advantage of this trend?’  And, is it possible to still create a successful business from this technology or is it too late?  Because, make no mistake.  Myspace is not just a website.  It’s a business!  Facebook and Linkedin are not just places to network, they are global businesses.  Both rSitez.com and Ning, social networking website providers, announced over 150% percent growth in 2009 – that’s more than doubling the business they did before the recession.  These are businesses expanding at an incredibly rapid pace in a global market, even during the worst economy in our lifetime.

Facebook, Myspace, and LinkedIn are some of what we consider the ‘first wave’ sites.  They paved the way for other sites and benefit from this by having tens or hundreds of millions of members.  These mega sites will most likely be around for a long time and will continue to grow globally as long as they continue to provide value to their audience.

However, we’re now seeing what we consider the 2^nd wave of social networking sites.  These sites are niche social networking sites.  They cater to specific groups and niches, instead of a general product like Myspace or Facebook.   To be successful, sites like these will need to cater to the specific needs of a targeted group or audience.  They will need to provide more than technology.  They will need to provide true value and hopefully solve specific problems faced by this niche or affinity group.  In many cases, providing technology will not be enough.  They may need to provide related services as well.  By providing the appropriate technology and targeted services, these sites will be able to prove value and as well have options to monetize this value.

For members of these niche sites that provide real value, it will not be a choice of Facebook or this targeted niche site for consumers.  It will most likely be Facebook AND one or more targeted niche site.   The reality is that no one particular site will serve ALL our needs.  We will most likely belong to multiple sites that serve different needs.  A musician, for example, may use Facebook to keep up with friends, but may go to a site like GenNextMusic to listen to or sell his own tracks, but then post and manage his business profile in LinkedIn.

Therefore, entrepreneurs who understand this opportunity and create a specific niche social networking site to target a specific audience that they can add value to, still has the ability to create a successful online social networking business even today.

In Part 2 of this article we will discuss the technology and leading vendors that you can use to create your own niche social networking site and the advantage and disadvantage of the different ways you can create your site.

About the author
Rohan Hall is the Founder/CEO of rSitez, Inc. (www.rsitez.com), a technology firm that helps entrepreneurs create unique revenue-based social networking sites. He is the author of Stop Working, a book that teaches entrepreneurs how to use technology, globalization, and networks to build a global business. He has developed technologies for a wide range of entrepreneurs and Fortune500 clients including HP, Corning, Oracle, Honda and various others.

In part one I discussed the market and the opportunity that still exist to create niche social networking sites.  With this post I will discuss the technology required to create these sites and the leading vendors you can use to do this.

The Technology

The problem with creating a social networking community site or business is the complexity of creating a site like Facebook or Myspace.  How can you do this?  Is this only for techies or can anyone do this?

Can you make money from this type of online business?  For the answer regarding monetizing these sites, please see my other blog post   How to Make Money Online like Myspace and Facebook.

The fact is anyone can now create their own social networking site and a surrounding business from it.  There are basically 4 different approaches that you can use to do this.  Each approach has its advantages and disadvantages.  The level of technical knowledge you need vary based on the vendor and product.  Here are the 4 main ways you can go about creating your own social networking site and the current market leader with each method.

SaaS Sites

SaaS means Software as a Service.  Vendors that provide these products will automate the creation of the social networking site for you.  The sites are typically point and click to create and completely managed online from a browser.   You will be able to upload logos, banners, and content based on different payment plans offered by the vendor.  Some sites will allow advertising and possibly membership fee collection as revenue options.  The features of the sites will vary depending on the vendor that provides the technology.  Your main job will be to put your own branding on the site, do minor configuration, and invite members to start using the site.  These sites are often white label social networking sites, meaning that you can put your own brand or label on the site to hide most or all of the vendor’s own branding.  In most cases you can do this within a few minutes or a few hours.  After that your main job will be to market the site and manage the site members and content.

Advantages:  You can literally have a social networking site up and running in minutes.  Typically, they have an established and stable architecture.  You never really have to worry about the technology; everything is taken care of for you.  You don’t have to worry about servers, IT staff, backups or other related issues because this is normally included with the service or there may be a cost for some of these items.   

Disadvantages:  You may not be able to completely have your own branding, depends on the vendor.  You may not be able to use your own domain name or there may be an additional cost.  You will not have ownership of the code.  You may not have ownership of the content uploaded to the site.   Normally does not include software development services to modify the standard application, therefore all sites will have the same basic structure and features based on the selected plan.

Primary Vendor:  http://www.rsitez.com/, Ning.com 

Premium SaaS Sites

These social networking sites offer the same advantages of other SaaS sites.  You are able to create a complete social networking site in minutes.  You can upload your own banners, logos, content and configure the site as you like.  These sites can often be 100% white labeled, meaning that you can completely remove the vendor branding and label from the site and replace it with your own.  Your site can be up and live within minutes or hours.  They will have all the same features or sometimes more features than some SaaS sites.

In addition to the SaaS model, these vendors also provide premium software development services to their customer base.  These services include the development of new site features, the modification of existing features and modules, the development of custom themes and widgets, custom developed revenue models or payment options, custom logos and banners, or even major site rewrite.  The goal of these vendors is to provide SaaS sites then surround the site with various software development services to create unique products for their customers.

Advantages:  You can literally have a social networking site up and running in minutes.  Typically, they have an established and stable architecture.  You never really have to worry about the technology; everything is taken care of for you.  You don’t have to worry about servers, IT staff, backups or other related issues because this is normally included in with the service or there may be a cost for some of these items.    Plus, you can have new premium features developed by the vendor that none of their other customers have, or features changed or written to your specifications to create a unique product offering.

Disadvantages:  There may be additional cost for premium features developed by the vendor or to own the code.

Primary Vendor:  rSitez.com

Downloadable Software

Some vendors provide complete social networking applications as a download that can be installed on a server.  Once the site is installed and configured you will have similar advantage of their SaaS counterpart.

Advantages:  You and your IT staff have full control of the application and code.  You may be able to customize the site yourself or hire software developers to make changes to the site for you.  You may be able to change the code to add more features, if the vendor permits this.

Disadvantage:  You will need to pay IT resource to install and support the application.  You will need to pay for servers or hosting, backups etc.  You will need to pay server admins to protect the application from hackers and malicious individuals and programs.  You will need to rely on software developers that may or may not have expertise on the particular application.  You will need to be responsible for the ongoing upgrade, maintenance, and support of the application and their related cost.

Primary Vendor: SocialEngine

Write your Own Code

You may be able to hire a team to build a social networking site for you.  They would write all the software code needed to create the site. Since Social Networking is still a relatively new type of software application you will need to find individuals who specialize in this.  Your local website designer or corporate IT programmer may not have the required experience to build the architecture needed for this kind of application.  The site could be built to your exact specification and once completed can be launched online like any of the other options above.

Advantage:  You will have full ownership of the code and site content.  You can have the site built to your specification.  The site can be branded or targeted with features to any group or audience.

Disadvantage:  There is an extremely high risk of finding experts in this area to develop these products.  There is a very high cost in developing a social networking application from scratch, even if outsourced.  The time to develop a full social networking site and take it to market can be 8 – 12 months or more with an experienced team or longer with an experienced team.  The product could have bugs that are not discovered until after launch and the team may no longer be available to fix the issues.  You will need a development team, design team, server admin team, servers and other ongoing overhead cost to support and maintain the application long term.  With the long development time, you may lose your early to market advantage by time the site is launched.  

Primary Vendor:  No clear market leader

Summary

Anyone can create their own social networking site today.  You can use any of the above options and make that choice based on your research, cost, risk, and value.  Most importantly, if you plan to take advantage of this market you will need to clearly understand how your site will create value for your members, and this value will need to be a part of your offering. 

Please let us know of vendors in any of these categories that you would recommend to other readers to create their social networking product.

About the author

Rohan Hall is the Founder/CEO of rSitez, Inc. (http://www.rsitez.com/), a technology firm that helps entrepreneurs create unique revenue-based social networking sites.  He is the author of Stop Working, a book that teaches entrepreneurs how to use technology, globalization, and networks to build a global business.  He has developed technologies for a wide range of entrepreneurs and Fortune500 clients including HP, Corning, Oracle, Honda and various others.