Monetization of social networks. Who has got the better system?

For many people the Internet is associated with social networks, providers of which are tired of the calls with “Why I cannot enter my Facebook or Vkontakte page?” questions. The designers of popular social network applications have already become millionaires. Analysts forecast a decline in their popularity, but the forecast did not come true, the community continue to dictate their terms on the Internet market, and shore their positions day by day. The owners cannot help but take this opportunity to make money out of it – a great many paid services have been designed, as well as sms-billing used by social network inhabitants. But the most critical and courageous step was the creation of social network payment systems.

Over the past 2-3 months, Pavel Durov, the head of the website “Vkontakte”, has pleased people with various new API features. But the real shock caused the announcement that the Russian social net was going to launch its own payment system. It’s called “Votes”. For votes, you can improve your rating, send gifts to your friends or play in the applications. But the most serious step was the opportunity to pay for goods and services in stores. The first Internet store to join the system was Futurico online shop "Nevoobrazimo.ru" (nevoobrazimo.ru). Interestingly, Pavel Durov is not going to charge online stores with a commission. Judging by his words, “Vkontakte” strives to be a catalyst for online commerce in Russia. Money will be deposited via sms, terminals and banks with any payment being confirmed by an sms-message. Withdrawals will also come with no fee for individuals and a fee for businesses will be from 0 to 0.7%.

Managers of the project “Vkontakte” keep on assuring that the payment system is not the way to monetize the site, but the way to improve it. Many have an idea of why Durov and Co. introduced this service. Of course, in order to compete with the Western services that have regarded Russia as a tasty morsel for a long time. Specialists claim that the introduction of the payment system is hasty and ill-considered, but on the other hand it’s inevitable, because FaceBook is waiting for the chance to capture the CIS countries.

The site created for Harvard students has grown greatly and now its audience is 200 million users. Mark Zuckerberg created his first project, it gained great popularity around the world, and is now dictating its terms. Over the past 6 months, the revenue growth has been 35% and, thanks to the partnership contracts with the largest online auctions and stores, it has grown by 300% if compared to 2008. Western folks trust online payments and it explains the enormous success of FaceBook. The monetization system is the same as in “Vkontakte”. It is safe to say that this Russian social network uses successful strategies of its Western competitors and imitates them in everything. FaceBook gifts are bought very frequently and the prices are much higher. Americans conduct very profitable deals and work with trusted customers. The main game supplier for Zynga social network gets $10-15 million a quarter and it continues to grow. In FaceBook, you can buy practically everything. The prices for gifts vary from a few cents to hundreds of dollars, and the turnover in FaceBook poker rooms is extremely high. The most important thing is FaceBook payment decision comes with no innovations, meaning it brings no problems for its users and designers. Probably, it’s the one of the main factors for success. Despite the fact that stability of such payments and models has not been proved yet, revenues of game and application developers as well as revenues of payment systems are quite real and will continue to grow during 2010. Compared with the Russian payment system, this one comes as its elder brother. FaceBook payment system is several times more powerful than the Russian system. Even though “Vkontakte” fully copied the structure of the system, visually it looks worse. Plus, Americans don’t use any sms-messages for payment verification and this indicates that they are confident in their security. It’s also worth to note the possibility of transferring money to users, which is yet unavailable for Russians.

In 2007, MySpace users could take advantage of eBay online trading technologies via PayPal payment system. An equally important feature of the partnership is that MySpace users can use their own profiles to automatically update information on their eBay items. In 2008, it was announced about the creation of its own social network. And six months later it was ready. 300 million users will appreciate the opportunities provided by the system. The system made it possible to transfer money between the users and also it removed the commission on the deposit and withdrawal operations. Later this idea was borrowed by FaceBook. Eric Shomfeld quickly entered the turnover of electronic money and monetize the social network services. After successful negotiations with major Internet stores, MySpace placed emphasis on the fact that its users would be able to work with them by using their domestic currency, without any registration. Unlike previous systems, the developers refused to introduce transfers between users, as well as reduced fees for the services. As for deposits, it’s all the same as that of FaceBook.

The new payment system immediately launched a system of micro payments with its introduction. Flattr represents a system of social micro payments: the user evaluates any content by clicking on the button. The creators of content can place the counter of clicks on their site, and each click comes as a small part of a regular revolving balance in a Flattr account. Each user has an unlimited number of clicks, but the more clicks he or she makes, the lower amount will be credited to the account of a content creator, which he or she liked. Flattr waved the concept of super popular systems by choosing a simple but interesting concept. Flattr comprises folks who like read and write and they are going to make the most of it. The account can be funded with various ways. Money transfers are not available, as it will contradict the concept of the site.

The most rapidly growing social network, which already consists of nearly a million sub-networks, is not in a hurry with the development of its payment system. It’s no big surprise because to function properly in all its networks, it should have not just a powerful API, but it also should be available to every user While the owners of the networks have launched payment of services and applications, but the level is not comparable with that of competitors, it’s much lower. After some time, Ning will have to enter its payment system, but almost all niches are already occupied, it is difficult to assume what solution will be found.

Classmates, LinkedIn and other giants are already working on the creation of the payment systems. And they may be in the forefront thanks to their groundwork.

The essence of most social network payment systems is the same, the main thing that brings them profits is the partnership with other services, as well as development of their infrastructure. It is really interesting to know how it all ends up for Vkontakte, whether they’ll increase electronic payments in the CIS, or maybe Western giants will claim their position. Today’s competition of social systems is mostly dependent on their payment systems, Merchant Api, the ease of use, and therefore we should expect further development in this direction.

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