WHENEVER the founders of Twitter, a social-networking service, have been asked about how much revenue they expect to generate from their creation, they have politely deflected the question. So when a hacker recently leaked documents after gaining access to the private e-mail accounts of a Twitter employee and the wife of one of its founders, the blogosphere was abuzz. The haul included a spreadsheet showing revenues reaching $140m by the end of 2010, up from $4.4m this year. Twitter dismissed the document as out of date, but it showed the firm’s owners believe it has the potential to mint serious money.

Their confidence is not surprising: Twitter is now thought to have around 23m users. Other social networks have also been piling on members. Facebook, one of the biggest networks along with News Corporation’s MySpace, has seen membership leap from 100m in August 2008 to some 250m today. With the number of people online worldwide expected to go from 1.5 billion today to 2.2 billion by 2013, according to Forrester Research, many of these networks will grow like Topsy.

Yet some experts point out that although social networks have captured the popular imagination, the managers running them face a delicate balancing act. They need to reconcile a desire to drive up membership as fast as possible—which increases the value of a network to both existing and potential members—with the need to experiment with ways of raising money to fund long-term growth. If they push too hard for revenue in the short term, they might drive away users, undermining a network. Leave it too late to monetise and the business could collapse.  (captured the popular imagination but lack monetise)

MySpace, News Corp in 2005, offers a cautionary tale ... it spent too much time chasing revenue and too little improving its online offerings. Now it is bleeding users and advertising.

Users typically want to hang out with their pals when they are online and so tend to ignore advertisements pushed at them while they are gossiping. The social networks are therefore considered less effective marketing vehicles than search engines such as Google, whose users are seeking information on specific subjects and are more likely to click on ads relevant to their interests. This helps to explain why advertisers will only pay a pittance for page views on many social networks.

http://www.economist.com/businessfinance/displayStory.cfm?story_id=14098313

IMO the econimist FAILS to mention that perhaps the best vision for a social network is "Non Profit" ... that is not mean "non Revenue" ... the popular imagination will shelter where ever they feel "community".  The real brass ring is for 23M Twitters, 250m Facers, and the coming army of 2.2 Billion more to claim their stake in the "online community".  The product is the community. 

www.Xoday.com