Wake up, social media users, we're crushing our creation

Kerri Breen on the financially tottering web world.

Just look at the numbers: YouTube is the third most visited website in the world, according to web monitor Alexa. Twitter, according to Nielsen Online, has grown 2,565 per cent in the past year alone, while Facebook announced it has surpassed 200 million users.

If they existed offline as regular companies, entities with this amount of interest would be dubbed too big to fail, even in the current economy.

But in the perverse, mirror-like world of online finance, bigness isn't necessarily a good thing.

A couple of red birds still trying to make a profit, Twitter founders Biz Stone, left, and Evan Williams pose for a photo in their San Francisco offices in January 2009. (Jeff Chiu/Associated Press) ((Jeff Chiu/Associated Press))

In fact, it's actually the high volume of users that is causing these companies to go heavily into debt or barely manage a profit.

With millions of users comes millions of dollars in costs. The amount of bandwidth required to host and store Facebook's estimated 850 million photos uploaded monthly is the online equivalent of Wal-Mart on steroids.

Add to that the other costs of doing business, including the salaries of CEOs, regular office staff and the brilliant programming weasels who make the services what they are. And you can see why finding enough advertising to offset these expenses has proven to be the web's biggest challenge.

YouTube, while attracting a projected 375 million visitors this year, is expected to lose its parent company, Google, $470 million, according to Credit Suisse. CNN has reported that Facebook, while making increasing returns on its massive network, won't generate positive cash flow until 2010 at the earliest.

Is the web 2.0 honeymoon over? If these sites don't become viable soon, their very existence may be at stake.

Dropping the ball

I think we all knew that there would be some growing pains as the old media world becomes swallowed by the new. But I'm wondering if that is all we are seeing here.

Online advertising is in a decidedly awkward stage of development. It's like a teenager who mopes around the house trying to figure himself out, longing for the day when this existence will matter less. (Cue the angry music.)

The day when traditional advertisers and the web make that happy union cannot come soon enough for our beloved websites. But, judging from the latest fumble, it's obvious they are not there yet.

Last week, Britain's Times Online reported YouTube will not make any advertising money from the Susan Boyle phenomenon.

The audition video by the once-dowdy songstress on Britain's Got Talent has received over 75 million views in two weeks. But due to a debate over advertising format, YouTube could not reach a deal to get ITV, the network that broadcasts the show, to allow advertising.

Like a normal teen, YouTube takes its parents' cash for granted. But as many bloggers have pointed out, even Google can't sustain losses and miscues like this for very long.

Death from below

All of these rumblings about the viability of our online creations occur beneath the surface. From the outside, YouTube and the rest of the web 2.0 world have a veneer of stoic invincibility.

Even the now-infamous Fail Whale — the cute little guy who lets you know that Twitter is over capacity — seems to insist that everything is cool.

But if you dig a little deeper, the picture is very different. Though venture capitalists have invested millions into the site, Twitter has admitted on its own blog that it's only now trying to figure out how to make a profit.

The promise, of course, is in the traffic. Twitter is the 23rd most visited website in Canada. It and the rest of social media are always boasting new features, new content and new users.

Investors are banking on the fact that it will be impossible to untangle the influence of user-generated web content on life as we know it. But, hey, somebody has to pay the bills.

The promise

Initially, the internet was packaged with a pleasantly naïve idealism. It hyped a society where the means of mass communication would be dispersed widely for the benefit of all.

First we had personal web pages, blogs and forums and now we have advanced to social networking and video-sharing to enhance the global conversation.

These latest services allow us ordinary users to integrate our material with what the pros do and to have it flow through the pipes with increasing ease and speed. But all this user-generated freedom comes at a cost.

The irony is that as more people climb aboard, to tell the world their life stories in a photo gallery or in 140 characters or less, the romance and democracy begins to fade.

With the burden of content, the true cost of this gaggle of free services is becoming more apparent.

If our cherished social media is to survive, it will do so at the cost of our patience and our privacy.

Advertising is becoming more pervasive, more invasive and more annoying. This can only increase as sites like Facebook expand.

Social networking users are already tolerating a considerable amount of targeted advertising for foolish products aimed at specific age groups, genders and locations. Because I'm 23, I am offered free Ugg boots. (Yes, there's a catch.)

Change your relationship status to single and within hours the online dating service ads appear. Is this an invasion of privacy? Not quite, you put the info out there yourself, remember. But it still feels a little creepy and underhanded.

At least on Facebook, you can usually discern the ads from the activity of your friends. The latest social networking cash grab involves people getting paid to post Twitter updates (tweets) that endorse specific products to their (supposed) friends.

The consolation is that as advertisers warm up to the web, the ads of the future might be for stuff you could actually see yourself buying.

But until mainstream companies become comfortable peddling their wares next to whatever weirdness went viral that week, we're stuck with ads for pyramid schemes and bogus weight-loss pills. They're not the kind of things that are going to pay the rent.