myYearbook: Would You Pay for Social Networking Extras?

Posted by: Douglas Macmillan on August 17, 2009

In many ways, myYearbook is the polar opposite of Facebook. While the average age of Facebook users gets older and older, myYearbook grows its core demographic of 13-17 year-olds, which make up 43% of users on the site. Facebook allows third-party developers to write applications for its site; myYearbook makes all of the games and activities on its site, like the popular “Battles,” on its own.

On Monday, the Pennington, New Jersey company detailed another factor that sets it apart from Facebook: it’s turning profits partly by getting users to pony up for extra features. Though myYearbook doesn’t disclose revenues, it says that it’s profitable, that revenues are up 120% this year and above $1 million total, and that more than one-third of its revenue is coming from sales of virtual currency.

myYearbook’s 31-year-old CEO Geoff Cook, who founded the site with his younger brother Dave and sister Catherine in 2005, stopped by BusinessWeek’s offices last week to discuss how the “Lunch Money” virtual currency system works and why it’s becoming such an important part of the business. Here’s a short video I shot with him:

Geoff Cook, myYearbook from Doug MacMillan on Vimeo.

Facebook can't afford to ignore this news. The world's largest social networking site now has more than 250 million users, and is estimated to bring in as much as $500 million this year -- that's an average of a measly $2 per person annually. If Facebook implemented a virtual currency system along the lines of Lunch Money (and the company has hinted that it plans to do just that) it would instantly open a new revenue stream to complement ad sales on the site.

What could Facebook charge for? myYearbook appears to be profiting most from its "VIP Club," which charges users between $7 and $20 per month to get extra Lunch Money and unlock extra features in many of the apps on the site. Since Facebook doesn't control the third-party apps on its site, it would have a hard time unlocking premium features in a similar way. Perhaps it could add premium features to its native applications, like photo editing or specialized event invitations.

I have asked this question of readers before, who said they would pay for these things: e-commerce storefronts, ability to "export data," remove limits on friending, vanity URLs (which has since launched free of charge), removal of ads, better privacy, and better management of "fans" for businesses.

Should Facebook pursue a model like myYearbook's? If you're a Facebook user, what would you pay to have added to the site?

Reader Comments

Roderick

August 17, 2009 12:52 PM

As co-founder of 9thPeriod.com, an education networking site aimed at the 13 and up crowd, we are committed to extending our premium features and recognize much like myYearbook that increasingly users are willing to pay for premium features on social networks so long as they add value and increase productivity. The trick for social networks is to be able to demonstrate to users via free trials or discounted pricing that they will indeed save time using advanced features. For example our iPhone and iPod Touch version of our product released this past Friday will bring our features to the finger tips of our users which is a time saver for those iUsers on the go! People indeed realize that time is money!

Josh

August 17, 2009 12:54 PM

I might be inclined to pay 5 or 10 dollars per month for some neat features, such as a built-in aggregator or P2P between users. But these would have to come with a killer GUI if I'm going to switch over from the free aggregator and P2P that I use now.

Squeezebox

August 17, 2009 1:05 PM

I don't even use social networking, why would I pay for it????

jazzmine

August 17, 2009 2:18 PM

ummmmm yeah itz for younger people(myyearbook) cuz old people took over facebook!!!!!

Phoebe

August 17, 2009 5:00 PM

I'd pay to lose the advertising. But that's about it.

KellyRShort.com

August 17, 2009 5:45 PM

Facebook will try in coming months and years to monetize its core offering, but ultimately the only way it will generate revenue is by enticing users to pay for advanced features, add-ons, and exciting new features. Facebook and other social networking sites shouldn't ask "what exists on our site that we can charge for" but instead should ask "what new features can we provide on our site to entice users to pay a fee?" - http://kellyrshort.com

Chaz Henry, CEO Powerchalk

August 17, 2009 5:55 PM

At www.powerchalk.com, we've taken a similar approach to a social network for coaches. We've realized that the social network is not the end game but an organizing structure. The real end game is the tools and yes, coaches will pay for them if they add value and make their athletes better.

Our site boasts the world's only web based telestrator that allows coaches and players to analyze video clips of athletes in motion. The base version if free but the dual screen and extended play versions are $99/year and coaches are buying.

tom h.

August 17, 2009 6:49 PM

Perhaps myYearbook can charge these fees because their users' parents are the ones paying them? In any case, Facebook et al. may benefit indirectly from the likes of myYearbook because the next generation of adults will be accustomed to paying for content/services.

Bill M

August 18, 2009 4:01 AM

Facebook should follow the model of the iPhone App Store. Developers would build premium Facebook applications, and Facebook would take a percentage of the sale. This could be done with virtual currency or directly in dollars. I think a lot of people would have paid for $0.99 to get the Scrabulous game, for example.

Laura S.

August 18, 2009 11:35 AM

Facebook has already been making money with their "gift" option.

I am a very active user of Facebook.com
In the past I've purchased "gifts" sold by Facebook.com which are the equivalent of a virtual charm that can be displayed on a friend's page, with a little note attached.

They were being sold for 99 cents, and with the variety available, I was able to hinge on a few inside jokes... this enhanced my social experience on facebook, and I was willing to pay the dollar to make my friend really laugh.

I'm not sure how much more purchases I would buy into- but I'm excited to see what facebook might have to offer in the future.

Jeff

September 17, 2009 5:37 PM

Phoebe - So you would pay to lose the ads? Would you pay an initial fee for a site without ads and after referring 3 members your membership becomes free for life and then you begin to earn residual income for all your referrals?! I have the site for you. The worlds first advertising free social network and money making opportunity. Why spend all your time on a network that isnt paying you a cent only to make them rich. Go to www.itsmyeverything.com and click on the "What is IME?" and "Make Money!" buttons on the bottom of the page for full details. If you are hesitant, join for free to check the site out first! Next Gen Web 2.0 social networking where users profit is here!

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About

Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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