The Byline: PR and Marketing Insights from Eiler Communications

QZone turns profits from people, not ads
Model for social network sites

It’s time for Western internet users to say “ni hao” to the biggest social networking website on the Internet, QZone. (“Hi” or “hello” in Chinese).

If social media want to build revenue models for their businesses, they need look no further than the highly popular 5-year-old Chinese portal, QZone. It generated $1.2 billion revenue in 2009!

QZone is a Chinese social networking site (available only in Chinese) started by China’s largest Internet service portal TenCent just five years ago, in 2005. The website has more than 250 million reported users as of late 2009, according to Reuters. Some of QZone’s features include tools to interact with friends, online games, uploading and sharing photos and music as well as the wildly popular instant messenger QQ. It permits users to write blogs, keep diaries, send photos, and listen to music. most services are not free. A user pays for virtually every service he or she uses.

What makes QZone unique to other social networking sites, like the U.S. based Facebook and MySpace, is how QZone generates revenue. In 2008, QZone and TenCent was over $1 billion and only 13 percent came from advertising. The rest of QZone revenue come from virtual purchases.

Virtual profits are made up of any type of service or online goods for which users pay real money. This can range from subscription fees to buying virtual clothes for avatars and codes or boosts for games. As silly as it may seem to some to pay for accessories for a two-dimensional character or to cheat in a game, this technique has made online companies in Asia wealthy.

Whether Facebook and MySpace can employ the same technique with equal success is still to be determined, but for now QZone stands as the best revenue-generation business model for social networking.

Larry Eiler & Alyssa Eckles

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