We have a couple of indicators this morning about how much a commercial social network can earn, and how inexpensive it is to build a profitable one.
At the top of the market is MySpace. New Corp, which announced earnings yesterday, doesn't break out MySpace's numbers in it's SEC filings but during a conference call with analysts yesterday, executives confirmed that they expected interactive sales to reach at least $500 million this year, led primarily by MySpace. (FIM also includes Foxsports.com and AmericanIdol.com.)
With nearly 56 million visitors a month, $500 million per year amounts to around 74 cents in revenue per monthly visitor (if all of FIM revenue is attributed to MySpace). We don't know if MySpace is profitable on an operating basis but perhaps we can infer something from the fact that News Corp doesn't tell us.
Meanwhile, Techcrunch reports on a company called Tagged. Even at half the scale of MySpace, Tagged's numbers are substantial-40 million members (half of whom are active) and 1 billion pageviews per month. Furthermore, Tagged CEO Greg Tseng says his company is profitable at $600,000 in monthly revenue. I think that means Tagged is attracting one billion pageviews monthly on an investment of $7 million a year.
Will the commercial social networking business develop on two tracks-with an indie, hits business continually bubbling up from the bottom end?
Look at the current economics of Hollywood comedies, which Jon Gertner brilliantly chronicled in the New York Times Magazine last November:
comedies...tend to have lower physical production costs, since they often don't require extravagant sets or expensive postproduction work. And if they have low artistic production costs as well (for the cast and directors), they have a kind of jackpot potential that dramas, at least in recent years, have lacked. In other words, even when a comedy doesn't produce the huge revenues of a blockbuster like ''Harry Potter,'' it can help push the returns of a portfolio way up if it is put together in a way similar to ''Little Miss Sunshine'' or ''The 40-Year-Old Virgin,'' which starred an inexpensive and untested Steve Carell. Such a film will pay off in the theater, on DVD, in television sales - and ultimately contribute to the studio's catalog. A popular comedy is a valuable piece of intellectual property. If it's made cheaply, it's the equivalent of investing early in Google.
Speaking of money, I'm fascinated by Sequoia's investment in Joost . As Matt Marshall at Venture Beat notes:
Roelof Botha, general partner at Sequoia Capital, led the firm's investment in Joost. He was also the lead investor in YouTube, a short-length video site â€" different from Joost, which wants to show full-length video.
Obviously Internet video paid off enormously for Sequoia with YouTube. And by virtue of its founders experience and its corporate support, Joost looks like a great investment. But it sure looks like a hedge, playing both sides against the middle in media wars.
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