Tuesday, December 30, 2008

Do Social Networks Have a Future?

How much time are you spending in social networks (Facebook, MySpace, Twitter, Friendfeed, etc)? Are these networks making any money? I am fairly active in Twitter and Facebook, but these interactions haven't been monetized. In other words, these social networks aren't making money from me. Also, I find that my colleagues and I are early adopters. If I took a cross-section of family members and colleagues my age or older, I would venture to guess that probably only 10% are active in social networks - not very significant market penetration. Where's the money coming from? Is this just a house of cards ready to collapse under the weight of a strugglig economy? Technology Review: Are Social Networks Sinking?
The air seems to be coming out of the Web 2.0 bubble, squeezed by the economic downturn and the absence of many solid short-term business plans.

Dire market conditions have forced virtually all social-networking firms to scale back. In October, the third most popular social-networking site, Hi5, announced that it would cut between 10 and 15 percent of its staff. And in November, the business-focused networking sites LinkedIn and Jive said that they would slash their workforces by 10 and 40 percent, respectively.

The dominant social-networking sites are certainly better equipped to weather the storm: MySpace and Facebook have estimated revenues of $750 million and $300 million, respectively, while LinkedIn is expected to pull in between $75 million and $100 million this year. However, the overall value of these companies is still largely based on growth potential, which now seems shaky. Microsoft's investment in Facebook valued the company at a massive $15 billion. But in November, Twitter refused to be bought by Facebook for a reported $500 million of its stocks plus some cash.

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