Should Social Networks Be Non-Profits?

Bo Peabody in the WaPo:

I launched the social networking site Tripod in 1995. By 1998, it was the eighth-largest site on the Web. But Tripod was never a successful business. Social networks aren’t great places to advertise. You can’t charge users for their services. And they never gain enough momentum to survive in the stock market. Indeed, no social network has ever made it as a public company.

The standard social networking business model relies heavily on advertising. As millions of members poured into Tripod, my investors and I thought the advertisers would follow. They never did…. The bottom line is that advertising does not work on social networks because social networks are not media businesses. Rather, they are communications businesses. So, how about charging users for social networks, like telephone companies do? We tried charging users at Tripod, and many others have tried it since. It doesn’t work. There will always be another service that will do it for free, and even if there is a fee charged, the amount of competition forces that fee to be so low that it never amounts to much revenue.

Instead of expecting profits that won’t materialize, the entrepreneurial community should instead operate social networks as not-for-profit organizations. Wikipedia has grown phenomenally with a not-for-profit business model, and while Wikipedia has its problems, its fate is in the collective hands of its users rather than in the hands of media companies or the stock market. Facebook and Twitter should enjoy the same comfort.

We need to learn from the first dot-com bust, when services that benefited society disappeared just because they didn’t make money. Imagine a world without social networks, in which I could not use Facebook to share hundreds of pictures of my infant son with his grandparents and the citizens of Iran could not use Twitter to challenge their political system. If we focus simply on a profit-and-loss equation, there is a real chance we will eventually lose these invaluable services.

Via Steven Berlin Johnson, who doesn’t agree with his friend Bo but points out “Important point in Bo’s piece: it’s not necessarily that Twitter will be a bad business; it’s that it’s too important to be a business.”