Tuesday, September 04, 2007

The Demise of Social Networking

If you've been around the internet as long as I have (I didn't invent the internet, but I watched it being born), you get a sense of how it works. I'm not talking about the technology. That's kid stuff. I'm talking about the people who use, abuse and sell the technology.

Anyone who witnessed the internet meltdown of Web 1.0 remembers all kinds of statistics and theories that were supposed to propel the "new economy" through the fiber optic pipelines. Most of them were, in a word, ridiculous. Concepts like "lifetime value of a customer" inflated worthless companies' valuations beyond the stratosphere. Today, all but a few early-selling believers in those myths and legends (Mark Cuban, are you listening?) lost more than they ever hoped to gain.

As we wade into the muck known (typically) as Web 2.0, we are once again asked to believe in a new set of scams and paradigms. This time, it's Social Networking. And while social networking isn't nearly as fallible as say, "personalized start pages", these are the things of which Internet Bubbles are made.

Let me clarify:

The thing that makes Social Networking such a dangerous concept is the fact that its basis is fundamentally sound. The truth is, and always has been, that the web is a communal medium, given to aggregating humans around a central source. Anyone, from anywhere, can meet anyone else from anywhere else, establishing bonds that range from discussions of nuclear disarmament to the best motels for a kinky hook-up.

So far, so good.

But the problems with Social Networking far exceed their benefits. In the first place, simply gathering a bunch of dopes into one place with no specific purpose has the same effect as advertising a Giant Tractor Pull with no Giant Tractors. Sure, you'll probably meet up with some beer-swilling fans chugging the same tall cans of Miller, but after that, what value is left?

Second, with no structure, how long do you think people can tolerate each other? After you've finished that last can of Miller, what's left to talk about? I mean, there's only so much small talk one can manage during the course of the day. Which means the entire category is subject to the same fast fade every novelty item experiences: A small introduction, followed by a huge grassroots acceptance, fabulous usage, drop-off in interest and eventual extinction. For those of you old enough to remember them, Social Networks are the Digital Pet Rock.

Third, there are now so many Social Networks out there that nobody has the time to deal with them all. Especially since none of them have any stated purpose, the main topic of conversations among Social Networkers is no longer which music is hot. It's which networks to axe. These things are major time sucks.

Fourth, the dirty little secret about Social Networks is that all but one (yes, it's my own i-legions.com that's been profitable since 1998) have no sustainable revenue model. They rely too heavily on third party advertising. But what advertiser is going to pay for a network that's here today, gone tomorrow? Especially when even the hottest Social Networks of the day can't produce effective results? In case you haven't heard, all but one Social Network continues to produce results considerably lower than your basic direct mail rates -- and their sell-through rates are even lower.

Does this spell the demise of Social Networks like MySpace, Facebook and all the others that come online in droves? Yup. Not because people aren't using them. But because all but one are fundamentally flawed.

Think Rupert Murdoch can't blunder by paying $800 million for MySpace? Think Google is genius for paying $1.6 billion for YouTube? Think back to Web 1.0, when Netscape owned 90% of the browser market and Qualcomm stock was nearing $1000 a share.

That popping sound you hear ain't just in your ears.


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