Social Networks think again about business models

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Some time back I commented on the fact that advertising cannot be the revenue earning business model for every activity, and in particular I wondered if Social Networks really had yet found the answer to this question, especially after FaceBook got hit for its ‘novel’ approach to ‘understanding’ and promoting its members’ interests to advertisers. […]

Some time back I commented on the fact that advertising cannot be the revenue earning business model for every activity, and in particular I wondered if Social Networks really had yet found the answer to this question, especially after FaceBook got hit for its ‘novel’ approach to ‘understanding’ and promoting its members’ interests to advertisers.
It really does seem that the old model of dog years to mark Internet progress has re asserted itself as the speed of answers to posted thoughts and ideas seems to be going ever faster. I guess you may have read the MySpace announcement of a revenue earning business set up with the big music labels in competition to iTunes? If not then you can find a selection of posts. The official site is pretty worthy, and dull, to get the vibes on this from, so if you missed it the news report from InfoWorld is a good place to catch up, but some of the blogs are more interesting and the readwriteweb site carries a particular one that brings me to my point, with a comment on this being beneficial to the ‘long tail’ of music more than the mainstream acts.

Now what is interesting is the business model competition; Amazon, Apple iTunes, and now MySpace, all after selling music, but with some interesting differences.
Amazon started as an online store model adding aggregation of various goods, but overall with the unique differentiator of using ‘peer group’ recommendations and feedback. However in the music side Amazon moved to offer downloads with no Digital Rights Management, DRM, and thus the music can be listened to on any device. This is a stark contrast to Apple which uses the Device iPod, iPhone etc. as the unifying proposition and ties the ownership of a ‘cool icon’ to the restrictions on the downloading of iTunes through the use of DRM.
MySpace is a ‘peer group’ centric model where I guess real Web 2.0 principles should support the ability for fan groups, and long tail approach to musical diversity, so it’s nicely differentiated in that respect, and is DRM free so what ever the make up of the social group in terms of their devices they can still access the music. So it is a new and different business model, and in a sense you can say it pits a Web 2.0 business model against the Amazon Web 1.0 model. It’s also an interesting and possibly effective alternative to artists going direct as in the ground breaking move by RadioHead, see my post on their contribution to changing the music industry, or will groups such as RadioHead move to bring in Web 2.0 style additions to their web sites and provide a similar people centric experience?
I will be watching with great interest as this does represent a new and interesting extension to business models in an industry that has already been the subject of the most violent business model shift to the extent that many observers regarded it as having met a maturity point.

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