The business models within the social media realm are much different than traditional businesses. In social networking, they’re ever-changing, backed by eye-opening revenue and have very little documentation.

Reason: as soon as someone sits down to outline ways social networks can be monetized, another model emerges, and another model ceases. For this reason, this piece will be routinely updated with new models and new feedback from your comments.

Below are the Four Primary Business Models in the social networking space that I’ve experienced–they primarily are concerned with Facebook Applications. There may be others, or extensions of these, or even ideas out there that have yet to be tested yet are profoundly viable. All additions are welcomed.

I. Display Ads:

This is your bread and butter business model. It centers on showing showing Display/Context Ads. The two major forms of this are CPC (cost per click) and CPA (cost per action or acquisition).

Example:

With the ad above, the user clicks the ad, they take a quiz, and usually they fill out their email address or phone number. The advertiser (IQ Quiz), will pay the Facebook developer (you) each time a user fills out their email address or phone number. Usually, there’s a middle man involved. The middle man is called an ad network.

These types of ads can pay out a CPM of $0.05 – $0.80 (*Depending on Country*)

Say you serve 1 million impressions of these per day, at a $0.20 CPM, you can expect to make $200 per day, or $6,000 a month.

II. Branding Certain Elements within an Application

This business model is rather new, and personally, my favorite. This model centers on branding a certain element within your application.

For instance, LivingSocial is an application where users can make a list of their favorite things. Big brands, like Porsche, may want to get in front of their audience and have users speak about their brand in a viral, social networking space. Therefore, Porsche will pay LivingSocial for each exposure to their audience. By exposure, I mean hitting the newsfeed of the user on Facebook:

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