Marcus Cake

Online social networks that trade in information with high intrinsic value are more likely to become successful businesses. If the information has high intrinsic value, then those that own or wish to promote the information may be willing to pay the online social network for a service. Customers that pay for the service drive revenue for business. The primary source of revenue would be the participants in the online social network. These online social networks will need less members to achieve break-even.

If the information has low intrinsic value, then the owners or promoters of that information would be unwilling to pay an online social network for a service. The online social network will need to rely on other sources of revenue. The primary source of revenue includes banner advertising paid for by external parties. These online social networks will need a far greater number of members to drive the revenue necessary to cover costs. Higher member numbers are likely to mean higher infrastructure cost and greater technology risk.

An online social network which trades in information with high instrinsic value is more likely to have a lower break-even point, less technology risk, a clearer value proposition and less investment risk. There is nothing remarkable about this statement. I am intrigued that there is not a greater proportion of online social networks which trade in high instrinsic value information. I am surprised at the amount of funding that some low intrinsic value online social networks have received.