Social Networking: Where to Show the Money

Last Updated Jun 30, 2008 1:11 PM EDT

Given the recent news of LinkedIn's billion dollar valuation, I thought some results of a market research analyst firm In-Stat March 2008 survey looked interesting. Premium services in social networking and similar Web 2.0 offerings are clearly going to be an important revenue stream. So far, the generally accepted conceit is that people aren't willing to pay for most Internet services, and unsurprisingly, the survey found that most people weren't shelling out for premium services or features. But the problem may be with the service providers, not the customers:
If consumers believe that the quality of services or features offered on social networking sites is not currently worth the money, then we can expect that as network operators improve service offerings, consumers will be drawn to these features and services over time. Supporting this notion is the significant response that came from the 18-24 year-old group â€" the largest group of social network users. A majority of these respondents indicated a lack of desired premium services and features. In-Stat interprets this to mean that if compelling premium services or features of increased value were offered, the respondents would have increased willingness to pay for them.
Granted, asking people what they would or wouldn't do under hypothetical circumstances is one of the least reliable types of market research you can get. But if this survey is representative -- and I haven't seen the methodology or sampling method used -- then perhaps the companies aren't doing enough work to find out what their customers really value. Unless you can understand your customers' perceived value, it's hit or miss whether you might offer them something they'd find attractive enough to pay extra.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.