While the social networking and video sharing sites are becoming more and more popular by the day among young and old alike, they are proving to be slower revenue earners for the service providers. The run-away magic of the free emails a decade ago which helped the service providers to earn profits through ads, encouraged them to expect the same kind of monetization through social networking and video sharing sites. But unlike the free email concept, these sites did not provide the appropriate space for the ad content so far. The puzzling fact of finding the right place to generate revenues through these sites will decide how these services are shaping out in the future. The reluctance of advertisers to have their ads alongside with less predictable content is another cause of worry which the service providers should find solution for.
Google executives have stated that inventory cost of these sites have become excess baggage to their other profit making services, which in turn has reflected in their fourth quarterly earnings. The company is working hard to find a way out of this predicament by figuring out a suitable ad format to derive expected revenues through their social networking services of Orkut and video sharing of YouTube. Microsoft with its stake in the social networking phenomenon, Face book Inc has also crimped their revenues in similar count. Facebook’s half of the total revenue of $150 million has come from the deal with Microsoft. Google’s and Microsoft’s interest in Yahoo clearly show that both the companies are keen on combining the online ad revenues with yahoo.
Yet Google and Microsoft are of the opinion that they are optimistic about extracting revenues through these media in course of time with higher acceptance and penetration. Ad spending on these sites in the US is estimated to increase by 70% in 2008 to $1.56 billion. But the eMarketer Inc, a market research firm, adds that next year it will lose pace with a growth of just 29% to $2.2 billion. According to the Google’s CEO, Eric Schmidt, these sites are taking longer time than expected to generate desired revenues. However, he showed great optimism in the long run towards the industry in general and the success of Google services in particular.