So, the big question remains: can MySpace and its peers be turned into multibillion revenue sources? Experience of News Corp. suggests that it is not as easy as it seems. On the other hand, Google’s acquisition of YouTube suggests that there may be some aces up Google’s sleeve and it will somehow overcome the huge copyright issues YouTube faces. However, to actually turn tens of millions of users into hundreds of millions of dollars will take more than putting an extra banner here and there.

Among the possible solutions may be pursuing a united effort of introducing paid services or new types of advertising across all major social networking websites. This way users will have a much weaker incentive to switch weibsites and the whole market can be ‘forced’ to accept the prevalence of paid services. However such scenario is highly unlikely, besides it may be deemed as illegal collusion and could be undone by the authorities.

Thus, Google and the rest of the ‘gang’ will have to prove that they still possess the innovation strength that has so far been putting them ahead of the rest of the market. Will they succeed in increasing their revenue per user and in keeping their user bases? The former is more likely than the latter, but you can’t make an omelette without breaking the eggs, so some user outflow will most likely follow. However, to increase revenues per user they will need to spend quite a lot of money and time, sweetening up their users and building up loyalty, until the ‘point of no return’ is reached, where users will be willing to pay and/or withstand advertising to get the content and services they want.

Alternatively, advertisers may be educated to not be afraid of letting their ads appear on unscreened pages. This may require some work to be done by the legal departments, and again – sweetening up (but this time – of advertisers), thus it may take a couple years before advertising on such websites becomes commonplace.

We are certain that website owners will come up with ways to effectively exploit their audiences and will eventually report decent revenues for the user bases they have. However, as often is the case in the IT business, the most innovative company will have an edge over the others and it may not necessarily be the wealthiest or the oldest of all. The big money is out there and we don’t think this market will remain untapped in the future.

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