The latest trend in online start ups is following the “funding and popularity now, profits later” model. Stumbleupon started this way and have now begun monetizing their site by offering advertising and sponsored membership.

Problems:

This model works for some ideas, especially those that gravitate users to a specific site or area. But monetization becomes more difficult when users are spread across multiple mediums.

New age social media suffers from something called the “API Issue”. It’s most prominent on Twitter, but Brightkite has the same issue, and once Plurk releases an API, it will to.

The “API Issue” is a problem best illustrated by Twitter. A majority of Twitter users don’t access the website to look at their time line, but instead utilized the API and desktop applications to keep track of their information. This makes the possibility of selling direct advertising difficult since there’s no single place all the site visitors go.

With Brightkite, the issue is slightly different because it doesn’t have an “API Issue” per se, but more of a “Mobile Issue”. Either way, the problem is the same.

Bad Ideas:

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When the question of Twitter monetization first arose, one of the answers was creating tiered membership. Where each tier allowed a number of friends or followers. The problem with this idea is that it penalizes that site’s most popular users. It doesn’t make sense to hurt those that help your site the most.

There’s also been talk about making Twitter a paid site, with a monthly membership fee. Although, paid content is not dead, it requires unique content. Micro-bloggers are used to free access and have too many options. If Twitter became a paid service, users could easily just move to Plurk or any of a number of other services that do nearly the same thing.

Good Ideas:

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The number 1 thing micro-blogging sites can leverage is the connection. The Twitters and Plurks of the world could easily follow the email marketing model.

Plurk has already hinted that they may consider this in the future with PlurkBuddy, a “personal all new users start out already following. PlurkBuddy gives site updates, but could easily be used to push a product or highlight a new start up.

BrightKite is in a unique position because of its mobile update platform. When a user updates their position BrightKite could respond with a confirmation that recommends stores, restaurants, and events in the area. This geo-targeted advertising could be very profitable for BrightKite.

What First?

Before these sites can be monetized they each have to overcome their pitfalls. Twitter continues to grapples with overcapacity, Plurk must find a way to attract big name users, and BrighKite has to become more than a novelty.

What do you think? Would making these sites profitable now, help fix some of the major issues?