Social media: you're doing it wrong:
I've been faced with people arguing for "big infrastructure" here, but so far we've been successful in keeping our blogging and community infrastructure (fairly) lean and focused - and thus in line with the potential revenue.
NEW YORK - As the bid deadline for ailing BusinessWeek magazine approaches the McGraw-Hill title is revealed to have spent $16m on creating its social networking site, which is generating little cash.Joanne asked how you can spend that much money on a social network. Here's how: think like a big company. They're a big brand, from a big company. They clearly need a big, expensive infrastructure, or so the thinking goes. Unfortunately, that rather ignores the fact that the products they're trying to complete with run lean and fast, with low overheads and the ability to adapt quickly to changes in their competitive environment.
BusinessWeek launched its social networking venture Business Exchange in 2007. By 2008 it had spent $16m on the site, which is estimated by the New York Time to have generated just $600,000 in revenues.
I've been faced with people arguing for "big infrastructure" here, but so far we've been successful in keeping our blogging and community infrastructure (fairly) lean and focused - and thus in line with the potential revenue.
The money spent on a website seems to depend on who the client is, it's as backwards as the football transfer market.
Who would spend $16 million on social networking software? They are being taken for a ride.
Reminds us of a story here in the UK. Birmingham City Council spend £2.8 million on a website that doesn't even come close to working...
Check it out:
http://blog.fluidcreativity.co.uk/index.php/bir...
Quite possible. Though I rather suspect there's less planning than that. Having run a company that builds social networking platforms from scratch i know the average cost of building something that can be classed as a company asset (and thus has almost 100% new code and design) is about £250,000 in labour. However, I'm also aware that if you have to rewrite the base code several times over to accommodate new functionality and usability issues that should have been ironed out at the wireframes stage, then the labour costs can easily double or treble. Then you have overhead costs in real estate, utilities, software and hardware to actually house the developers writing the site and that can be another £150,000 a year. Then you have the hosting costs at about £4000/month. So as a base cost an entirely new platform comes in at about £450,000 for the first year, rising to around £1m if you have a lot of re-writes of the architecture. Now the writers of the original software have a right to sell their work at a reasonable profit, so I can see the cost gettting to about £2m (US$3.5m), with an ongoing maintenance cost (including hosting) at about £120,000/year (US$200,000).
But that still leaves us a good US$13m (at least) off the phenomenal $16m price tag.
All I can imagine is that someone has listed a proprietary social networking platform as being worth a substantial amount more than any proprietary asset is actually worth. Maybe McGraw Hill needed some way of offsetting its tax duties?
Sorry that should read US$12m (at least) off the $16m price tag. I really shouldn't type with long nails :)