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Consumers don't like paying for anything online. This is especially true when it comes to younger consumers. Common knowledge, right?

Wrong. Just ask myYearbook, a second-tier social network that caters primarily to teens. It has managed to do something many other social networks haven't: turn a profit. And it's done it by charging its supposedly frugal Gen Y users.

According to paidContent, myYearbook is profitable on the back of subscription and virtual goods businesses that have increased revenues by 120% year-over-year.

myYearbook, which was started by two teens in 2005 with the help of their internet entrepreneur brother, sells a virtual currency called Lunch Money which myYearbookers can use to purchase a variety of virtual goods. Lunch Money can also be acquired by completing CPA offers, a model that is surprisingly not employed as frequently as it could/should be.

More recently, myYearbook launched a VIP Club subscription service. Monthly fees range from $6.99 to $19.99 and give subscribers a monthly allowance of Lunch Money and access to exclusive virtual goods.

According to myYearbook CEO Geoff Cook, only 2-3% of myYearbook users have signed up for a VIP Club subscription. This, however, is in line with the company's expectations and Cook is very satisfied with the company's path, stating "The freemium strategy has been an extremely successful part of myYearbook's monetization strategy, and we remain bullish on the additional revenue possibilities that this model will bring".

Although myYearbook is no social networking slouch (it has over 10m members), it is a second-tier social network that doesn't have the same brand recognition as Facebook or MySpace. In fact, a recent survey showed that 91% of myYearbook users are on MySpace and approximately two-thirds are on Facebook. Which makes the fact that it is turning a profit charging users all the more impressive.

Whether through virtual goods or subscriptions, it's clear that social network users aren't exactly tightwads and there is money to be made.

The greatest beneficiary of this might be Facebook. myYearbook's success in charging users highlights just how important the full launch of a payment platform will likely to be for the world's largest social network. The challenge for Facebook, however, is in reversing the potential damage caused by its hands-off approach to app monetization, which has driven app developers to third party services that provide monetization tools. If myYearbook's experience is any indication, a more aggressive monetization strategy that provides an easy and seamlessly integrated payments/virtual currency solution for app developers could turn Facebook into a real cash cow.

Photo credit: House of Sims via Flickr.

Patricio Robles

Published 18 August, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2380 more posts from this author

Comments (2)

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Phil Galland

Another great exemple is http://www.modlife.com. For a couple of bucks per month fans can chat with the band, access exclusive videos, blogs... True fans (even young fans) are ready to pay for exclusive content and interaction with their best bands

As stated Tom Delonge: “Bands will be able to have seamless interaction with their fans. They can double-click on someone’s face and start video-conferencing these kids instantly, so the subscription service is a new thing. Basically for two cups of coffee a month, they can come on every single day, and there’s something new every single day, whether it’s little short films behind the scenes or motion pictures we’re making, live shows, broadcasts, the band will be on camera every day at certain times doing weird shit.”

almost 7 years ago

James Gurd

James Gurd, Owner at Digital JugglerSmall Business Multi-user

Interesting article as always Patricio. I think the comment about value is key here. People will pay if they perceive a value in the service above and beyond the free competition. I will not pay for Facebook because I don't really want to be connected to hundreds of people I don't have time to build meaningful relationships with. However, whilst it is free I'm happy to take the occasional 5 mins to check out someone's latest pic uploads of their mud wrestling weekend....

Thanks for the links to coursework.info and modlife.com, never come across them before.

Interesting to see if the reciprocal model works Ashley - kind of like the old barter economy, swapping goods you perceive to have parity of value. If you've got nothing to offer, you have to had over the hard cash. Then the network essentially becomes an exchange.

Second Life was going to be the future at one point with a financial model that enabled members to make money and transfer into the real world. I've not heard a peep about Second Life since last year. Any news or is it in decline?

Not convinced that critical mass will follow for the subscription service to social networks all the while there are so many free services. However, if 2-3% provides a viable financial model to maintain the free service elements, perhaps others with follow suit.

thanks

james

almost 7 years ago

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