Networking sites face data cost crisis, Web 2.0 is going to burst
 

http://www.telegraph.co.uk/finance/n...st-crisis.html

Dozens of social networking companies could fail next year as digital advertising slows and a new type of dotcom bubble threatens to burst, according to research from consultants Deloitte

Surviving websites may be forced to supplement their revenue with pay-subscriptions, selling members' data or extra financing, the researchers said.
The gloomy forecast comes as growth predictions for digital advertising have halved from 17.2pc to 7.2pc for next year, according to eMarketer.
The Deloitte research shows that as revenue declines, the cost of storing electronic data has soared to more than $100m (£68m) a year for larger sites, as users increasingly want to upload memory-hungry photos and videos.
"The book value of some social networks may be written down and some companies may fail altogether if funding dries up," said Paul Lee, Deloitte director of research for technology and telecommunications. "Average revenue per user for some of the largest new media sites is measured in just pennies per month, not pounds.
"This compares with a typical average revenue per user of tens of dollars for a cable subscriber, a regular newspaper reader or a movie fan."
Analysts estimate that there are more than 1,000 social networking sites on the internet, with 100 big players hosting profiles for 22pc of UK internet users. The best known, including MySpace, LinkedIn, Twitter and Facebook, are likely to be more resilient in the face of the advertising slowdown. However, many of the most popular social networks, such as Facebook and Twitter, do not yet generate large profits.
"Neither [Facebook or Twitter] has yet demonstrated that it can make money on a scale that matches its number of users," said Madan Sheina, an analyst at Ovum. "Twitter has yet to sketch out plans to
monetise its blogging site. Revenue has always been an issue for Facebook."
Facebook was valued at $15bn (£10.2bn) when Microsoft took a $240m minority stake in October last year. "With the economy spiralling into a downturn that figure might seem to be exaggerated right now," Mr Sheina said.
Facebook founder Mark Zuckerberg has stressed that his focus is on growth rather than making money for another couple of years.
There are, however, signs that the company is feeling the strain of the downturn, as it recently cancelled a plan to allow its employees to sell off shares early on account of the economic climate.

Yep, heard this a few weeks ago.

Mainstream adrevenue is being cut back, and drying up. Even on the adsense networks.

As more adult programs cut, and feel the crunch. You are going to see more of the big BROS cutting back. It should be interesting to see who's left at the BROventions end of next year, and the following.

For those who've been pushing that bullshit yoke about everything on the net should be free, and advertising driven. Welcome to your crow. Eat up. Guess we'll super size our fries next time we see you eh?

For the rest of us who've been in this game a decade. It's a flashback to late 90's, early 2000's when the net changed from free Utopian dream to a pay to play format.

When will you 'the internet should be free' fuckheads ever learn business 101?

:disgust

1. Build it
2. Give it all away for free.
3. ------------
4. Profit

Sounds interesting, bump!

We'll see how many large tube sites are left by the end of 2009, this economy may just help this industry after all.

3. Check out DamageX podcast.
http://www.sin20.com/node/4634

nothing is really free ... it's just a matter of WHO is paying

Exactly right.

the flip side of that is that if you are not very discreet about making money off the surfer, you dont get much traction.

Depends on the kind of surfers you target, really, and how you educate them. Some can be educated and learn that paying for quality far outweighs the cost of scouring the web for free crap which sucks balls most of the times. Of course, your product/service also needs to live up to your promises. :)

:thumbsup

Yep. That about sums it up.

ROFL. That's exactly it.

Makes a lot of sense.

With more and more people wanting to store their media on the web and the revenues to maintain those web resources are going down, shit might start raining.

For example - now you can get a fully functional computer for what, $300? Those netbooks are more than enough for the average user.

Broadband is available for everyone.

And with the evolution of web services, people host EVERYTHING online. Most obvious is videos.

So the demand is rising, but the resources to meet that demand are becoming more and more not worth it.

Sorry for bumping an old thread, anyone got any recent data on this?

i wonder how is flicker and similar sites are doing with their paid subscriptions

+1
duke

So the bandwidth will become more expensive for all of us?

That's sort of the result of not having enough revenue to cover an ever-increasing bandwidth bill. :)

What impact do you guys think cloud computing will have on this? If any.

simple math

people more and more learn to ignore ads

companies more and more pay attention to clicks and conversions

companies notice its cash in the trash

pull ads

continue yourself

Adds? What adds? Hell, I don't even see them anymore. I seriously couldn't tell you what single banner on GFY has been or even a skinning on the last year or so. I'm use to no giving a damn or paying attention whatsoever.

Add that to the fact I run my computers and this forum with signatures turned off and tools to prevent popups/popunders redirects etc. and the Internet has actually become a fun place to surf again.

If I'm ANYTHING like the average surfer... those add campaigns are totally worthless.

guess that was all bullshit. been almost a year now and the sites are all chugging away as usual.

The clock is ticking still but yea, several months later haven't seen anything major die...unless you count something like tr.im, lol.

For now.

I agree that the conventional web advertising of surveys, sweepstakes, money-making products, health products, etc is dying down. However, advertising will evolve, despite clicks and conversions there will always be a reasonable demand for exposure. It's like saying companies are throwing away millions for commercials during the super bowl because they figure most are just ignoring them.

Also, as people in the business we are more aware of advertisements and a bit more critical of how successful they can be.

they've been dying for years now lol.