Interesting parallels to the dot com boom & collapse.  In my opinion, advertising is a huge portion of the revenue stream for these companies and will continue to be so as long as they can keep the member engagement and new regsitrant ratios high. 

Personally, I tend to get involved with these types of sites for a period of time and then trail off as I engage in other sites or activities.  If I'm even close to the norm (or at least in the ball park) then diversification of revenue streams could be key to long term success. 

Approaches such as monetization of specific valued activites or membership costs would be a good path to explore.  Most situations off-line for networking come at a price (conferences, networking events, trade organizations...)  It's not unreasonable to think that an online forum could operate under similar principles.  While the venue is dramatically different, the psychology of the member's interactions and goals of members are not.

Hi Kathryn,

yes, the question on everyone's lips.

Clickz also just ran a piece on this.

And yes there does seem to be a large sense of deja vu about this and the dot com bust of just few years ago, which was a repeat of the stock market bust of 1987. (Notice how some people keep making the same mistakes.)

Having said all of that, people also wondered how Amazon was ever going to make money and match its stock market valuation in the early days.

It has of course survived and is doing very nicely, but then thousands of other dot com businesses perished.

In terms of social media UGC sites, there is bound to be a very painful rationalisation of the industry (probably this year).

Which survive and which fail is going to be a total gamble.

We live in interesting times.

Yes a challenge on all web2.0 business plans.

I think there is one key difference to the dotcom boom. Ideally these web2.0 companies should cost less to run - content creation is free as created by the community, and advertising is almost taboo as we rely on viral promotion. So perhaps the difference to dot com for many will be the low burn rate, which may achieve a longer survival rate as organic growth is more achieveable.

wasn't it myspace that was acquired for $500M and then a yr later signed a contract with google worth $900M for the right for Google to be it's search results provider?

that alone is a pretty good start for revenue for MySpace, however I know what you mean. They need to monetize it far more than that to be worth the valuations they are currently getting.

Here are a couple ideas...

1. sponsorship (not the usual CPA). TechCrunch does this well. I have heard that the going rate for a sponsor ad on TC currently sells at 25k/mth. I think they display at least 8 now?
2. virtual gifts (like Facebook and Minti)