Back in the bad old days of the dotcom boom, all you needed to do to give your stock a boost was to append the suffix ‘.com’ to your company name. Everyone was doing it, from oil companies to greengrocers, and somehow not to join in made you look like you just didn’t get the digital revolution.
Now, if you spend any time amongst the venture capitalists of Silicon Valley, the buzzword you hear is ‘Social Networks’. Anything being pitched for funding seems to have a social networking component – the success of MySpace (sold to Newscorp), Bebo and latterly, Facebook have made these Web 2.0 business models very attractive as investment prospects.
So is Social Networking just the new ‘dotcom’, or is it changing the fabric of the web, and the next big business sector in media?
First, we need to understand what social networking is. Most outside observers think about it in very narrow terms, equating it to what happens on Bebo – social in the ‘leisure’ rather than in the ‘collective’ sense. But these sites (though important) are just one manifestation of social networking.
At its most fundamental, social networking is about the ability the internet gives people to share their experience.
So social networking covers a broad spectrum from sites where users expressly contribute information through to those that collect tacit data and share it back.
At one end of this spectrum, the sites we all know, MySpace, Bebo, LinkedIn, Facebook, have experienced huge growth in audiences as people have discovered the power of connecting with others – either supplementing their existing social networks, or finding new friends and building new contacts.
This space is changing rapidly at the moment. Facebook opened up their API (the code that lets other people and companies develop systems that integrate with Facebook) back in May, and within a month, 40,000 new applications have been developed for the site. Ranging from a horoscope widget to a tool that lets you rate people anonymously, some applications have already attracted over 6 million users, and have contributed to a massive takeoff in Facebook usage in general. If you’ve been getting a lot of Facebook invitations recently, this is why.
In the middle of the spectrum are sites like Digg and Flickr, where whilst you might add content yourself, the biggest area of activity is rating or classifying the content added by others. The brilliantly un-PC site hotornot.com is a great example of this - 12 billion votes have been cast in the last seven years as people put themselves up for judgement and rate each other.
Finally, there are the sites which collect tacit information – data you leave behind as you use a site. These are often similar to ‘collaborative filtering’ technologies employed by retailers like Amazon – ‘people who bought this book also bought books like this’, in that they aggregate the behaviours of many people in order to make recommendations back to individuals.
Last.fm (recently sold to CBS) uses information on the music you listen to on your computer to suggest tunes that match your tastes, based on what other people with similar habits listen to. StumbleUpon learns what websites, images and videos you like, and shows you similar ones it thinks you’ll like.
But wherever these sites sit on this continuum, they’re networking society together in entirely new ways. Whilst theoretically we could have done any of this stuff before the internet arrived, the reality is that it was neither economic nor practical.
So social networking isn’t just a flash in the pan – it’s changing the way we share information with each other, and allowing us to establish and maintain relationships with people we just couldn’t have stayed in touch with before.
Within this there will always be companies that are overvalued, or simply overtaken by new ideas. But we’ve hardly scratched the surface of the value that social networking as a whole will create both for users and investors.