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Online Social Networks can increase ad revenue by stimulating content

To increase revenue, social networking sites need to give their most active users reason to post more information and make more friends, according to Harikesh Nair of the Graduate School of Business and his co-researchers.

Social networking sites, such as Facebook and MySpace, make their money through advertising revenue generated as users click on specific pages or featured ads. So what’s the smartest strategy for network owners? Should they work to get more users and stimulate clicks?

Do users with lots of friends tend to post more content, or do users who post more content tend to attract more friends? If both are true, social networks are subject to a "network effect" arising from content generation: Adding more friends generates more content, which, in turn, generates more friends for users, and so on, leading to a self-reinforcing virtuous cycle beneficial to the network site.

Overall, the research suggests, networking sites seeking to increase their income need to stimulate the creation of user pages and other content. The solution is to give the most active users incentives to continue making friends, which keeps the entire network robust, growing, and opening pages for visitors.

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