The Business of Networking

Networking has become a popular business model to adopt for new startups in the past decade or so. With the advent of big startups such as Facebook, Twitter, Linkedin etc., networking has established itself as a popular model to look for budding entrepreneurs.

To start off, what is Networking about? Networking is basically connecting people around something in particular.

Social Networks: These networks help people connect to other people for friendship and to enhance their social networks. Popular examples are Facebook, Orkut etc.

Professional Networks: Here people can connect to others for work and to enhance their professional networks. Linkedin is the prime example.

Interest Based Networks: Here people connect to each other with a particular interest in mind. Some examples include startup networking to raise investment, people networking to get married, find love and so on. Some examples include Angel-list, Tinder etc.

So why has Networking become so big? Networking’s success as a business is dependent on one tendency of humans – ‘Humans want to connect’. Connections create value and hence, a combination of a tendency with value creation has to be sustainable.

Now, how do these guys make money? The Networking service for users is free in most website.

Some typical revenue models are mentioned below.

Advertisements: This is the most common and significant revenue model for a lot of businesses. Promoting your account or content through banner ads, featured listings etc. is done by users of the network. A lot of businesses use these sites to connect to existing and potential customers and hence they are the ones who tend to advertise the most.

Freemium: Basic services are free. For enhancing your account features, you need to pay. For example in some matrimony portals, you can view up to a certain number of listings free. For viewing more, you need to pay.

Affiliate: These websites have the database. Brands wanting to market to this database pay these websites a charge for sending out their emailers etc.

Subscription: Some websites, to keep the network closely knit and very relevant, charges subscription from users. The thought process is that only those users will pay up who are genuinely interested and can add value, thereby acting as a filter.

Networking has emerged as a strong business model and in this era of constant innovation, knowledge and competition, the benefits of networking are bound to grow.