Social networking and video sharing sites are quickly finding that more users doesn't necessarily equate to higher income – particularly when many of those users come from developing countries.
The costs of serving data to developing regions are driving down the bottom lines of popular sites such as YouTube and Facebook, the New York Times said.
These costs will of course decrease as more backhaul links become available, but that will still leave the main problem – the majority of users from developing countries simply don't make enough money to be of interest to advertisers.
The obvious solution would seem to be to form regional subsidiaries aimed at securing partnerships with local advertisers. It is a strategy that YouTube is trying, but with limited success – the company told the Times it has slowed the creation of new international hubs.
At least one video sharing site, Veoh, has blocked its service from users in Asia, Africa, Latin America and Eastern Europe, as it was unable to make enough money in these markets.
YouTube, meanwhile, is exploring options such as lowering the resolution of videos served to developing countries during peak viewing periods. And MySpace is trialling a stripped-down version of its site for countries with slower internet connections.
These companies need to decide on an optimal solution soon, or one of the key features of the web – its democratic nature – could be threatened.