Judgement day for social networks approaches

The experimental phase for social networks is over. It's time to show a viable business model, analyst firm In-Stat claimed.

Services like Myspace, Linkedin and Facebook have had a fun time signing up users, but now the time has come to start making charging those users for premium services or useful advertising.

It can hardly be considered a coincidence that the wake-up call coincides with the high-on-hype Web2.0 expo that is taking place in San Francisco this week. At the event, one of the show's organizers asked a packed keynote room if they considered web2.0 a bubble. To his own surprise, nobody seemed to deny the hype element.

18 Apr 2007

But except for the purpose of hype debunking, why would now be the time for the Web2.0 bubble to burst? The Web1.0 bubble burst because entrepreneurs had lied to investors about their growth and customer base and because investors failed to see that a two year growth trend couldn’t be extrapolated into a larger trend for the overall economy. This fueled a mad rush on talent, equipment and office space that snowballed out of control.

Current web2.0 startups rarely have VC funding, and we haven't seen a single Web2.0 firm go public. Investors aren't fighting for investment opportunities, because except for Myspace and Youtube, the returns have been abysmal. Development meanwhile is done with worldwide teams of a few dozen people, as evidenced by a continuing number of vacancies in the Silicon Valley real estate market.

It doesn't seem that Linkedin or Facebook need to be afraid of In-Stat's doomsday scenario. But then, it wouldn't hurt any Web2.0 service to be profitable either.

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I am a Silicon Valley Realtor (since 1993) and I have been getting my toes wet with social networking and blogging. (My blog is www.LiveInLosGatos.com and is in the process of getting a makeover.) My efforts on Linked in and MySpace are minimal, and I've had a zero response. However, I've been very, very involved with Active Rain (www.ActiveRain.com and sister site www.Localism.com) and it's paying off nicely - both in terms of direct business and building business and referral relationships with other agents. Active Rain has over 25,000 members (Realtors, Lenders, Stagers, Appraisers, Title/Escrow professionals, Inspectors, etc.) and has a whole lot of blogging going on - and Google seems to like that. The exchange of ideas is awesome. But what truly amazed me was the speed with which I gained a new client from having a profile on that site. My client did a Google search and landed on a page where she found me. No cost but a little time to me. I cannot speak to other industries, but I believe that Web 2.0 will be very, very big in residential real estate. Sincerely, Mary

Posted by: Mary Pope-Handy 20 Apr 2007

Surely the biggest challenge has to be for network owners to create a platform that attracts and enables companies and brands to integrate their products and services directly into social networks. At the moment, companies, organisations and brands continue to advertise AT network users rather than to communicate and interact WITH them. Clearly advertisers will both relish and be nervous of this opportunity, but it needs to happen. A question posed on the Ecademy network this week about what people would expect from a Nokia Business Club received over 160 comments and was viewed by 6000 members - showing that such a strategic approach is very powerful - producing a wealth of rich and valuable feedback for any company that wants to enagage with network users. Philip Calvert Author, Social Media Consultant and International Speaker

Posted by: Philip Calvert 19 Apr 2007

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