Social networks struggling to make money

Even social networking sites like MySpace struggle to make a profit

Social networking sites are struggling to make money as few US consumers are willing to pay a monthly fee to use them, new research reveals.

Parks Associates' Digital Media Habits II report found that 72 per cent of social networking users would stop using a site if they were required to pay a monthly fee of as little as $2.

Advertising looks like the obvious alternative, but the research suggests that nearly 40 per cent of respondents would stop visiting a social networking site if it contained too many ads.

This second finding presents a challenge to companies competing in the social networking space.

Parks Associates found that 80 per cent of US broadband users aged 18-25 use social networking sites on a monthly basis, but monetising these users is proving to be difficult even for leaders such as MySpace.

"Having a big base of loyal users is not enough," said John Barrett, director of research at Parks Associates.

"To really succeed, social networking sites must consistently deliver to advertisers a desirable consumer demographic, preferably when they are about to make a purchase decision.

"For example, a site devoted to car buyers presents obvious advertising opportunities, while sites with broad appeal are too watered down to command a premium. Sites are not able to sell a hodgepodge mix of consumers."