Almost half the Internet traffic generated in India is on account of social networking, and while this has not translated into advertising revenue so far, a pioneer in the country’s Internet space expects the situation to change.

Social networking sites account for 44% of India’s Internet traffic, but this has not translated into ad revenue so far

“Nobody has made money on social networking so far," Ajit Balakrishnan, chairman and chief executive officer (CEO), India Ltd, the company behind, one of the earliest Indian dot-coms, had previously said. “But when 10 million people congregate, somewhere down the line the company will make money, and it will be advertiser-related,"he had added. launched iShare, a video sharing platform, in July, and plans to add a social networking tool to it in the coming weeks.

Indian firms and entrepreneurs entering the social networking space are convinced that they need to build up a critical mass of users first, and then worry about advertising., started by the Reliance-Anil Dhirubhai Ambani Group’s Reliance Entertainment three months ago, has about 700,000 users but no advertiser yet. Similarly, one-year-old social networking site for students has a user base that exceeds one million but no advertisers.

“On the Internet, consumer is king. They decide where they want to spend theirtime and advertisers recognize that," said Siddhartha Roy, chief operating officer, “You want tofirst create a strong user base and give them an uninterrupted experience."

Kavita Iyer, CEO, Minglebox, agrees: “...In this business, users fluctuate from one site to another and it is important to first reach a certain level of stability and maturity before getting advertisers on board."

But some experts say that those scrambling to enter the social networking space have left it too late, and that plain vanilla social networking will, by itself, not work any longer.

According to Balakrishnan, social networking has to become more than just a communication platform. “Social networking will have to be morphed into every online initiative," he had said. “It has a tendency to pick up fast but loses momentum just as fast. This is why we are integrating iShare with social networking."

That’s a strategy similar to the one adopted by Yahoo Inc. “We want to make Yahoo mail more social by combining properties such as SMS,instant messenger and emails together. It’s too early to tell what we’re planning on social networking, but it will be a convergence of communication channels," John Kremer, vice-president, Yahoo Mail, had previousy said.

Others are trying this as well. Ibibo Web Pvt. Ltd’s is a multi-platform social interactive site with applications such as networking, blogging and gaming as some of its applications. “We’ve been around for seven months in India but I can tell you that it takes about two to three years of good consumer traction to drive revenues," said Ashish Kashyap, CEO, Ibibo group. “It is important to create a picnic effect before we can get to advertisers," he added.

Advertisers themselves seem content with the picnic effect itself. PepsiCo India Holdings Pvt. Ltd has not yet bought into social networking from the advertising point of view, but it has bought into the concept. “Pepsi has not advertised on social networking sites so far but we have got what we wanted by users themselves creating discussion groups about the brand," said a spokesperson for PepsiCo India.

According to one expert, that may well indicate what social networking sites need to do to start earning revenues.

“For advertisers, social networking sites are slow in generating revenues directly but they are good in influencing decisions," said Gulrez Alam, group head, paid search, Communicate2, a paid-search marketing company. “Social media sites will soon have alternative revenue generating tactics that will help influence the user without intruding on the experience, that’s the way ahead."