Page 305 - Electronic Commerce

Chapter 6

Other programmers then use the software, work with it, and improve it. Those
programmers can submit their improved versions of the software back to the community.
Open-source software is an early and successful example of a virtual community that
we would now call a social network. Each social network is devoted to the creation,
improvement, and maintenance of a particular software application. You will learn more
about open-source software in Chapters 8 and 9 because much open-source software is
used to run the Internet itself, Web sites, and the electronic commerce activities at many
of those sites.
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Revenue Models for Social Networking Sites
By the late 1990s, virtual communities were selling advertising to generate revenue.
Search engine sites and Web directories were also selling advertising to generate revenue.
Beginning in 1998, a wave of purchases and mergers occurred among these sites. The new
sites that emerged continued to use an advertising-only revenue-generation model and
included many of the features offered by virtual community sites, search engine sites,
Web directories, and other information-providing and entertainment sites in the early
days of the Web. These Web portals, which you learned about in Chapter 3, are so named
because their goal is to be every Web user’s doorway to the Web.

Advertising-Supported Social Networking Sites
Visitors spend a greater amount of time at portal sites than they do at most other types
of Web sites, which is attractive to advertisers. Other types of social networking sites
can also draw large numbers of visitors who spend considerable time on the sites. This
section describes how these characteristics make social networking sites appealing to
advertisers.
Smaller social networking sites that have a more specialized appeal can draw enough
visitors to generate significant amounts of advertising revenue, especially compared to the
costs of running such a site. For example, software developer Eric Nakagawa posted a
picture of a grinning fat cat on his Web site in 2007 with the caption “I can has
cheezburger?” as a joke. He followed that with several more cat photos and funny
captions over the next few weeks and added a blog so that people could post comments
about the pictures. Within a few months, the site was getting more than 100,000 visitors a
day. Nakagawa found that a site with that kind of traffic could charge between $100 and
$600 per day for a single ad. After generating a respectable income from the site,
Nakagawa decided to sell I Can Has Cheezburger to Ben Huh for $2 million. Huh now
operates the site as a part of network of more than 50 similar sites that together get
8 million visitors each month and generate annual revenue of more than $1 million,
which supports a staff of about 40 employees.
As you learned in Chapter 3, sites that have higher numbers of visitors can charge
more for advertising on the site. You also learned that stickiness (a Web site’s ability to
keep visitors on the site and attract repeat visitors) is also an important element of a site’s
attractiveness to advertisers. One rough measure of stickiness is how long each user
spends at the site. Figure 6-4 lists the most popular Web sites in the world based on the
number of users who accessed the sites during the month of August 2013.

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