Financial Business Models of Social Networking Companies - Dissertation Example

The researcher states that in an effort of tracing the history of social networks over the internet, one would hardly miss the greatest invention of the 20th century, the computer, which was originally conceived as a device to comprehend complex mathematical problems but later reborn as a means of communication through the internet. The World Wide Web is one of those services that use the internet and through which social networking sites have proliferated in the new century. The first vague concept of the social network can be traced back to 1997 where it was defined as a computer-mediated network that connects people and organizations.

Built on this basic concept, a decade later, Boyd and Ellison formally defined the social network as a web-based service that allows people to create a public or semi-public profile through a bounded system, and share, articulate, and communicate with a list of other such users. In this period of 14 years, not only the concept of social networking has gained a stronghold but it has also created a situation where the companies are valued in billions, where Facebook is set to achieve around $7 billion in advertising revenues in 2012.

Social networking sites (SNS) are defined as web-based services that allow individuals to construct public or a semi public profile, can articulate a list of users with whom the users share a connection, and at the same time view and traverse the list of connections. The social networking world has a few big names associated with it such as MySpace, Twitter, Facebook, Twitter to name a few. These social networking sites are the most famous and widely in use (Boyd & Ellison, 2007). Social networking sites have undoubtedly grown dramatically fast.

This quick emergence and growth have provided a much wider corporate sphere with a lot of new marketing options which as many believe have quickly caught up with the marketers who can exploit their communication skills in tapping the huge database of social network users. In this context, Twitter has been seen as something of a slow starter, who didn’t have a business model two years back. Currently, it has 100 million active users in 2011 while revenues have jumped from $45 million in 2010 to $140 million in 2011 (Venturebeat, 2011).

Twitter was also reportedly once approached by Facebook for acquisition but turned down the offer to remain independent. It has been working on ways to increase the revenue streams through advertising and mass-scale marketing, avoiding the possible backlash of its users in case it tries to commercialize Twitter. The 2011 performance of Twitter is a result of Tweets promotion, Trends promotion, and accounts promotion through ad products. Twitter was started by ex-Googlers Evan Williams and Biz Stone and creator Jack Dorsey in 2006 when they bought back the shares of investors who had initially put their money in Odeo that failed as a podcasting company.