Many social media businesses offer everything for free. Founders want a strong base of users before charging. Some start-ups might take a closer look at charging sooner, as the battle between Twitter and Yammer demonstrates. Twitter is a wildly popular microblogging tool (’”right now I am…”). You use the Web or your cell to send 140-character messages to your group of opt-in friends and fans. It has millions of users, uneven service and no ads or other revenue sources. Alternatively, copycat service Yammer, dubbed by TechCrunch as leading “Twitter with a business model” made money almost from the beginning.
As Yammer’s chief executive David Sacks boasts, “because it spreads virally like a consumer service, but earns revenue like a business service. Anyone with a company e-mail address can use Yammer free. When that company officially joins — which gives the administrator more control over security and how employees use the service — it pays $1 a month for each user. In Yammer’s first six weeks, 10,000 companies with 60,000 users signed up.” (Of course the service has to work.)
Next year Twitter will create profit centers. Ironically, one under consideration is emulating Yammer by charging companies. Twitter founder, Evan Williams promotes a “growth-first approach” to demonstrate a track record before monetizing yet attracting customers is a credible record. My preferred “stay in touch” tool is Socialcast, what Rafe Needleman calls a “Friendfeed for business.”
One lesson from these startups: A hybrid approach of either “free + fee version” or “ free + advertising” seems best for many us, both as social media business owners and as sought-after “customers.” Hybrids have proven to be popular and profitable, for example at Flickr, Ning and wikiHow.