Over the past few weeks, there have been big changes from well-known technology companies including Facebook, Twitter, and Ning. At the core of many of these changes is a recognition that free only works to a certain point. With this in mind, it makes sense for those who are considering new Social Recruiting services to be cautious whenever a site lists one of its major benefits as free. If you can’t figure out how they are making money now or plan to in the future, it is very risky to base your long-term recruiting strategy on the continued use of the service in its current form.
During the third annual Facebook developer conference, Facebook introduced many new changes to their platform. With their goal of creating a more social web, Facebook has modified many of their existing privacy settings to create a more compelling user experience. Essentially, they have taken the concept of an anonymous cookie and placed it on steroids. Websites that utilize the Facebook Open API will now know much more about you once you land on their site. This is a big win for advertisers and developers that are looking to build compelling verticals on top of the Facebook platform (default for the social web). The more data a company can gather about a visiting user, the more tailored they can make the user experience. Many have bemoaned the changes Facebook has made from their humble beginnings as a closed network of friends and family to an increasingly open platform inclusive of the entire web community. However, these arguments neglect the fact that Facebook needs to generate revenue in order to continue to meet the needs of their massive user base.
After several years, Twitter finally rolled out its plan for generating revenue — an advertising-based model similar to Google but with key tweaks that are more consistent with their company culture. In one of my prior posts, I covered this subject in more detail. However, the key takeaway is that sponsored tweets have huge monetization potential for advertisers seeking to tap into the rapidly growing Twitter user base. In order to maintain the social benefits (interaction & engagement) of the service, Twitter plans to only serve up tweets that have already shown high resonance with users. While there are some user experience questions that need to be resolved (I still haven’t seen a sponsored tweet), it is clear that Twitter is taking the first steps toward profitability.
Not too long after Twitter introduced sponsored tweets came the news that Ning would be discontinuing their free product offering to shift their support to paid premium account users. While there were many complaints about this shift, it turns out that free does not scale well. What is unfortunate is that Ning touted the zero cost of their platform as a key feature to customers during sign-up. Unfortunately, there is really no way to get around companies needing to find a profitable revenue strategy in order to continue as a going concern. I’m sure that the executive team at Ning tried hard to make the freemium model work for their user base. After taking a hard look at the numbers, they realized that the amount of ad-based revenue being realized from free networks vs. the expenses incurred to support them would result in continued losses. As a result, they focused their attention and continued investment & support on the premium accounts that have demonstrated a proven ability to generate revenue on an ongoing basis.
While these changes were surprising to many users, I believe these shifts are indicative of a broader question of value recognition from content and services delivered via the Internet. Although this question remains unresolved, this does not mean that there is no value in free sites. In fact, with the rise of Social Recruiting, free sites are a risk-free way of learning about new technology. The key point is that you should not get too attached to a site that is free. At some point, the company must generate enough revenue to pay employees, lease office space, market their product, and invest in product development. To achieve this, they may need to make some changes that alter the user experience that you have become accustomed. Or, even worse, if they do not figure out a scalable business model before their investment capital is exhausted, they will go out of business. As employers seek to capitalize on the efficiency and effectiveness that technology-based solutions offer for recruiting, these are important considerations to keep in mind before you rush to sign-up for a new site that highlights free as part of their value proposition.
–Omowale Casselle (@mysensay)
About the Author: Omowale Casselle is the co-founder and CEO of mySenSay, a social recruiting community focused on connecting talented college students with amazing entry-level employment opportunities. Our solution integrates social media tools, real-time web-based communication, and intelligent analytics to enable employers and students to discover, interact, and connect with each other.