The scientists assume that dolphins use the most perfect social network in the world. These wonderful animals live in communities and interact with each other all the time. An advanced sea inhabitant can send a message to his girlfriend through a dolphin Internet in order to make a love statement. And if he gets in trouble he can call for the whole flock using a common chat.

So we can say that social networks are a prehistoric invention in some sense. But they have their own history.

The Pioneers

1971, ARPANET. Internet was developed first for military goals. It is not surprisingly that the first kind of social network was a technology used by army. The first message transmitted from one computer of the ARPANET network to another should be the word LOGIN, but after the second letter the connection was lost.

1988, IRC. The finnish student Jarkko Oikarinen developed an internet chat, where you can interact in a real time mode. The program spread over the entire Internet through the USA. IRC is a multi-user chat system where people meet on channels dedicated to particular topics.

Today IRC is a system with hundreds if not thousands independent networks, many users and sophisticated technology inside it.

1995, Classmates.com. The prototype of future Facebook and russian network “Odnoklassniki” did not look like today’s social network first. You could not have your own profile there, you could only take a look at the list of educational institutions and names of their graduates. But it was Classmates started the boom of internet communication. The project is developing to date and has over 50 millions registered users.

 

Social networks: from idea to business model

Seek You

1996, ICQ. The internet pager took over the world in just few years was developed by the team of high school kids from Tel-Aviv started the company called Mirabilis. The abbreviation ICQ is being pronounced like I Seek You. In two years the internet giant AOL purchased ICQ together with Mirabilis for 407 million dollars, a really incredible sum for that time. In 10 years the russian investment fund Digital Sky Technologies bought it for 187 million only.

In 2005 ICQ had 500 millions users across the world. However, with the emergence of mobile applications the program started to dramatically lose its market share. Today it’s being used by 11 million people and the developers are seeking for new solutions how to incorporate ICQ into modern reality. But there won’t be any golden time for ICQ anymore.

 

Social networks: from idea to business model

Six handshakes

1997, SixDegrees. A social network close to modern concept of it finally appears. Six Degrees is a famous theory of american psychologists Stanley Milgram and Jeffery Travers. According to it, all planet inhabitants know each other through a chain consisting of six people.

You could make your profile on the website of SixDegrees, search and add friends. In three years the project was sold for 125 million dollars, and in one more year it was closed. According to its creator Andrew Weinreich, the network has simply outrun the timeline. There was no widespread internet access and therefore the network was unable to gather large audience.

1997–1999, AsianAvenue, PlanetAll, MeGente, BlackPlanet. After success of SixDegrees developers got infected with the business model of social network. And the industry starts booming. But no project could gain a universal popularity before LiveJournal appears.

 

Social networks: from idea to business model

About myself

1999, LiveJournal. Another student, Brad Fitzpatrick created a platform for communication and for the first time for development of specific communities . There are still bloggers on LiveJournal who love to write a lot and do it very well.

In an interview from 23 of September 2009 Fitzpatrick tells about first times of LJ. “I started LJ for my pleasure, as my own diary. My friends started to use it, then friends of my friends etc. And then by accidence I allowed registration for everybody”.

2002, LinkedIn. The Author of the main social network for professionals gained experience in Apple and Fujitsu and tried to find investments for his idea. LinkedIn helps find partners, staff, new job in any place of the world. There are no topics like weather and books. Business contacts search benefits the project mostly.

In 2016 Microsoft purchased LinkedIn for 26,2 billion dollars. Today the network has over 500 million registered users.

2003, MySpace. Personal posts became very trendy soon. You could write about yourself as an extraordinary person or professional in LJ and LinkedIn. And then MySpace came up. The platform broadened options for users. Now you can create pages and groups, add pictures, video and audio files. The network rapidly spread among music bands. But in one year the world has been changed.

 

Social networks: from idea to business model

The ones who changed the world

2004, Facebook. Harvard student Mark Zuckerberg created a platform for the students of his University, where students could communicate with each other, exchange pictures and change their statuses. In 2008 the website was the most visited in the world and has today the second position, ahead of only Google. The network accounts today for 2 billion monthly users.

2006, Twitter. American programmer Jack Dorsey launches a network in a new revolutionary format. Users exchange short text messages which are limited with 140 symbols. All messages are in public access for user subscribers.

The service is liked mostly by Hollywood stars and politicians. They express their opinion and interact with fans in a form of short twitts. American singer Katy Perry was the first Twitter user who gained over 100 million subscribers. In that regard service administration posted a message with congratulations and video with history of singer’s account.

Now Twitter accounts for over 300 million users.

 

Social networks: from idea to business model

In the vastness of CIS

2006, «Odnoklassniki». The first social network showed up in Russian speaking Internet was the platform of Albert Popkov similar to Classmates.com. Search of classmates, college roommates, friend from other cities, even relatives – here you can restore lost connection. The network accounts for 300 million users for the moment.

2006, «VKontakte». The platform creator Pavel Durov first intended the platform will be used by graduates. Now it is the most popular social network in Russia and CIS. You can have your profile there, post status, exchange picture as well as upload video and audio files. Due to that functions the service became a popular hosting. Now VKontakte accounts for 380 million users, 80 million of those check their profiles on the daily basis.

 

Social networks: from idea to business model

Even less words!

2010, Pinterest. Pinterest became a first official network with a visual content. Here users exchange illustrations and pin them into boards. According to statistics the service is being visited by 250 million people monthly.

2010, Instagram. Another platform for picture exchange. It becomes extremely popular and plans to overrun Facebook. Behind picture uploading and editing, you can live broadcast in the network. Instagram official statistic reports the number of 600 million users.

In the same time appears many other social networks like YouTube, Tumblr, Google+, Ask.fm, Snapchat, Telegram, Periscope. Each of them is trying to occupy a certain niche and to keep its users.

By the way here is about YouTube.

Take a look, here is a guy wandering across a zoo. It’s Javed Karim. One of the developers of the famous payment system called PayPal made this video and uploaded it to his new website. It is how YouTube began.

Why is it beneficial

Social networks are long ago not only a communication channel. Almost every company has its own profile on one or another platform. That allows to meet some marketing challenges, in particular to create PR-campaigns.

This is a primary source of the monetization of social networks. They implement target advertisement, targeting particular audience selected by geographic, gender, professional, age and other principles. In that way your brand can customize who will see your advertisement. This is a most safe and effective way of social network monetization.

Behind that social networks implement paid services. SMS-voting, virtual gifts, sales commision, statistic services and many others – social networks are constantly involving developers and coming up with new options competing for users.

Very focused social networks create their own way of monetization. For instance, picture exchange platform can attach premium photo bank, business contacts network can introduce an expert base or premium account with broader functions. All depends on the imagination and sources of developers.

Finally you can simply sell a social network. Giants like Google and Yahoo show interest in purchasing promising projects. So independent Instagram was purchased once by Facebook. The deal is estimated in 1 billion dollar. It is a good monetization, right?

Social networks: from idea to business model

A catch accounting for millions dollars

The social network Facebook has leading positions in terms of both traffic and income. The company profit for the last year was 10,2 billion dollars. If you compare with the previous year, the service improved its profit margins by 117% and its revenue margins by 54%.

Despite the fact Twitter is the most visited social network, its stock dropped dramatically. The income reached the point of 717 million dollars and it’s only 1% above the previous year. Twitter is losing its positions to Instagram and Snapchat.

Instagram management doesn’t disclose its official financial numbers, but according to marketing research company eMarketer, this year the company earned on sales of the advertising about 2 billion dollars. Last year the number was more modest, 595 million dollars only. The company growing rates already overrun Twitter and Google+.

The LinkedIn platform belongs to Microsoft corporation made a revenue of 933 million dollars last year and its growth was 34%. During the first six months of 2017 its income was 975 million dollars. The growth rate is not so high, but it’s still growing.

The revenue of the single russian service in this rating – VKontakte – has grown almost up to 4 billion rubles (or 6,9 million dollars) during the last year. And it is 40% higher than last year. VKontakte’s numbers are definitely lower than those of his western colleagues, but anyway it is growing and shows good results.

As you can see from revenue numbers social networks are a very successful business model in digital area. Unconditionally, its revenue directly depends on traffic and it depends on developers and creators.

Therefore it’s clear that social networks market starts to separate into niches or in other words platforms for people combined by common interests. And exactly the launch of specialized and focused platforms looks like the most promising idea in terms of popularity and capitalization. Because it is the capitalization that drags on the company and its assets.