This morning I saw an interesting article in Techcrunch about a possible Bebo acquisition offer which led to an interesting discussion about the real value of community websites.
All these community sites are usually obtaining money from advertising as their services are free, therefore it seems that the more users and the more pages per user viewed should lead to a bigger revenue and so to a bigger value. Well, as said in one of the comments, there are at least two reasons why this is not necessarily true.
On the one hand, the content is user driven, and thus you encounter a lot “indecent” information, photos, etc. Therefore, some advertisers may not want to appear in this context because it will go against their image.
On the other hand, as the design, layout and also the content is provided by users, adds will probably pass unperceived. You can try the exercise, when you go to a news site or a blog you are interested in, after having read all the information try to remember about the advertisers.
Anyways, we are talking about hundreds of millions of dollars. This looks like a lot to me but I guess, mainly because the unique real differentiator of these websites is usually the user database (technically they are not very complex and the content is provided by users), the barriers of entry are then low. You will of course need money to build your image and market your site. Obviously media companies don’t want to stay behind in the race and so they seem kind to invest big amounts of money.
I hope nobody has forgotten what happened 5 years ago …
