Thursday, April 03, 2008

Social Networks are the Next Commodity

When I need to fly I typically treat myself to a copy of the Economist. In my opinion, it's got some of the best news available in the world. Last week, on a trip to San Diego, I picked up a copy for myself to enjoy.

The March 22 issue had an interesting and compelling article about the future of social networking sites. Essentially, the premises state that social networking is something that will become pervasive and a feature that people come to expect on a site. There's no question that social networking is becoming ubiquitous. You could make the argument that social networks are already a commodity, in the way that because they are everywhere, and cheap or most likely free to participate in, social networking is already a commodity.

OK, what does that mean? It means that the only way to make any money on a primarily social networking platform is to increase volume. Indeed, it's the page views, not the amazing amounts of revenue that make Facebook so highly valued. What I found interesting about the article in the Economist was the part that mentioned how difficult it is to create any sort of solid revenue model based on the high-traffic, social network, advertising only business model. There are some serious limits to the amount of money a business can make with this kind of structure. And it gets worse. Since most social networks don't to anything more useful than poke, attack, or leave a message on a page for a friend, there's not much value for a user to remain loyal to a site he or she is a member of. That means declining page views once the buzz is gone. You can see attempts to maintain buzz by sites like myspace and linkedin constantly adding new features, but in the end, it just makes for a more complicated we application, with a diluted purpose.

So, what's next?

Email for one. The fore-mentioned article makes a point of explaining that email is the best way to really build a rich social network for the sake of networking. That's right, email is the next killer app. Check out Xobni. They're building what I believe is a real and genuine social networking app with purpose. And they integrate it with your email client. I also expect that we'll see some pretty amazing things, with some genuine utility, hitting our mobile phones very soon. When I mention utility, I'm not talking about ridiculous pillow fights or zombie attacks either. With the android platform, and the iPhone SDK, developing real social networking applications that tie into real people doing real things in real time becomes much more of a possibility.

What about social networking sites? I believe that we'll see somewhat of a shake down in the realm of social networks. They will be on plenty of sites, and the smart ones will use some means of identity sharing between them. However, I believe that the social networking destinations will need something of real value to offer their users. Otherwise, with nothing invested, and nothing returned, there's not much reason to build a profile. Eventually, social networking will become the byproduct of something more useful.

1 comment:

amolpatil2k said...

If Economist takes a top down view, so will all its readers. The biggest constraint in any service is closure. This is the reason I agree with you on email being a killer app because it has the highest closure. Closure is kind of like the bottom up component of our largely top down services. The other point is degree of abstraction. Users need a mechanism to separate their avatar from their self in a flexible manner. The last point is granularity - only fixed platform and changing plugin models have any chance of surviving novelty grace period.