Social Media, the Developer’s Sandbox, & the Question of Profitability and Productivity

Last Thursday The Economist ran a piece (Tweeting All The Way to the Bank) about the value of social networking sites. That is, the author asked: what is the monetary value of Twitter and Facebook?

The leadership at Twitter and Facebook is focused on ways to make money while preserving their very approachable user experience. The challenge for the giants of social networking isn’t finding advertisers–it’s about knowing where to place the ads so users and Madison Avenue types are both happy.

However, the article only starts to pave new ground when it reflects on the interesting playing field that web 2.0 companies have created. Facebook and Twitter, like Apple’s iPhone, are increasingly being enhanced by outside inspirations, plug-ins, and ideas. Designer applications add value to existing web 2.0 platforms.

Independent developers are creating fun, useful, and interesting applications to improve social networking sites–for a profit. And it’s a lucrative business: “By some estimates, developers working on Facebook applications may pull in as much revenue this year as the site itself.”

The iPhone works in a similar way. Anyone who has a clever idea for the use of Apple’s smart phone can create an application for the iPhone’s platform and sell it in Apple’s e-retail store. Facebook and Twitter may go the same route and charge developers for the right to sell their wares and ideas on their popular platforms.

Here we are forced to sit back in awe of social networking. 10 years ago it would be hard to imagine a new medium of lucrative media able to captivated nearly a billion users that allows anyone to come along and change it, tweak it, and generally make it do what they think would be kind of fun.

Social media businesses, it would seem, are responsible for creating a interactive platform, a common ground, for a community of users to share, discuss, and contribute information. The rest of the innovation is largely up to everyone else. This new model may change the need for boardroom innovation and brainstorming in even traditional businesses.

The challenge for creators and users of social media is not the immediate demonstration of profitability, but rather figuring out how social media can enhance the proactive capacity of corporate culture. If order for social media to flourish in the world of business it must become a productive component of entrepreneurial corporate culture. It must become a tool that can be used proactively in order for it to increase productivity.

Those who now try to measure the short term Cost-Benefit analysis of social media are missing it’s essence.