Social media chiefs converge in Davos, finding big profits still elusive despite heavy use

Followers good, dollars better for social media

DAVOS, Switzerland — The leaders of Facebook and other social media sites have long seen some grim writing on their wall. While spectacular popularity has turned them into household names, they haven’t found a way to transform all those friends, fans and followers into profits.

On Wednesday, in a rare encounter of rivals, the chiefs of Twitter, MySpace, Facebook and LinkedIn met with industry experts at the World Economic Forum to plot strategies for the future — and help other business ride their success as well.

The common theme: developing social networks so they get beyond socializing to drive humanitarian causes — Haiti earthquake relief, for example — or help businesses better communicate with their customers to increase sales.

While participants touted social media’s ability to reach out, form relationships and keep people and businesses linked together, they offered scant insight into how the companies can make money, cashing in on their enormous fan base.

“What’s important for them is to become indispensable to consumers,” said Augie Ray, a senior analyst for social computing with Forrester Research Inc.

“For Facebook, one of the interesting things is the value of advertising that is super relevant and also increasingly involves the preferences and actions of your friends,” he said.

Facebook, which draws revenue from advertising posted down the right side of its site, has generated buzz about a possible initial public offering this year. The site created a dual-class stock structure in November, a move that is typically a precursor to going public.

“That is the same scenario that Google did prior to their IPO,” said Scott Sweet, senior managing partner of IPO Boutique, an investment research firm.

If it does go public, Twitter and LinkedIn may be tempted to follow, he said.

Evan Williams, chief executive and co-founder of Twitter, the wildly popular micro-blogging tool, said more and more small businesses were listening to their customers via the site, capitalizing on the way individuals build relationships across social media platforms.

“This is the heart of what a lot of social networks are about, they’re about communicating … but they’re also about relationships of all types,” he said.

“Some of the stuff we’re excited about with Twitter is an individual will follow a local business, a coffee shop, and get their special of the day.”

Randi Zuckerberg, whose brother, Mark Zuckerberg, founded Facebook, showed how the use of the site, along with others, promoted charitable giving to Haiti after the devastating earthquake there, providing information and a source for donating money.

Experts see huge business opportunities remaining in social media sites. George Colony, chief executive of Forrester, noted that “we now spend five to six hours a day on media,” a figure second only to the amount of sleep people get.

Of the 15 top trafficked Web sites, seven of those are social by nature, including Facebook, which draws some 130 million views a day; MySpace, which counts some 50 million to 60 million views a day; and Twitter, which has some 25 million views daily, according to ComScore Inc.

More and more, though, those sites are migrating to a business-oriented landscape with posts from friends seeking work, restaurant recommendations or the best places to buy cars or computers.

That, in turn, means that “social media is becoming the operating system of a business,” said Don Tapscott, chairman of nGenera Insight, an information technology think tank.

Businesses have used Facebook and Twitter to tout their brand, courting fans, offering discounts and rewards through the social networking sites, among others.

Online revenue building depends fundamentally on the social aspects of the Internet — a notion popular sites like eBay were quick to understand, building a customer base on qualities such as trust and transparency, said Tim Berners-Lee, the British physicist who invented the world wide web.

“Little changes in how you treat privacy can dramatically affect the way the social network works,” he told a room packed with social networking executives, tech journalists and pundits.

In eBay’s case, they’ve increased privacy in some areas as the online auction site has matured. For example, the site now hides the identity of people bidding against each other.

Younger users, however, seem far more open to revealing personal details about themselves.

“All these concerns about privacy tend to be old people issues,” said Reid Hoffman, executive chairman and founder of LinkedIn, a social networking site aimed at workers and job seekers.

He said transparency and accessibility are two reasons so many younger users — teenagers and young adults — put their mobile phones on Facebook or MySpace. “The value of being connected and transparent” is so great, he said.

Tapscott said social networking would become what “we want it to be” over time.

“It has an awesome neutrality and we need to build into it basic human values,” he said. “And one of those values is the right to informational privacy and the right to be left alone. I completely reject this view that privacy is dead. It’s in deep trouble, it needs to be saved and everyone needs to get involved to protect their own information.”

On the Net:

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