I remember a conversation with a venture capitalist in 2003 during which I suggested to him that social networking would be a very good place to look for the next big, big thing. He asked, “so you don’t think it’s a fad?” He wasn’t suggesting that it was a fad, but he clearly wasn’t sure. Most of the other investors I met back then were certain that social networking was a fad.
Fast forward to the Summer of 2007. I was having sushi with a good friend who is one of the best engineers I know. At that dinner he told me that *all* future web applications would be developed on the Facebook platform. Everything. The pendulum had swung to the other side of the hype cycle. Many investors were also excited about the opportunity and invested in everything social at silly [in retrospect, at least from the perspective of this moment in time] valuations.
With the recent financial downturn, Silicon Valley is heading back to the “social networking is a fad” side of the hype pendulum. ”These sites are like nightclubs, and users will eventually find something else” is a common refrain amongst many in Silicon Valley these days. ”Even if they aren’t like nightclubs, you can’t build a big business on $0.25 CPMs, right?” And others are suggesting that even Facebook is in trouble.
While the hype cycle clearly got ahead of itself in the past few years around all things social, the fundamental trends are wildly positive for the future of social computing — both from a usage perspective and, eventually, from the business perspective. Yes we are going through some hard times and everyone will feel the pain — even Facebook. There is no doubt that we must turn audience attention into revenue. Despite all of these challenges, to channel John Doerr, I believe social networking is underhyped.
Facebook and others in the industry think about their mission as exposing and documenting the *real* set of relationships that people have in the offline world, rather than creating a separate online social graph. While users navigate this graph online today by surfing from profile page to profile page, or perhaps through some entertaining third party application, the future is going to look more like the offline world.
Think about how you make so many of the important decisions in your life. Need a doctor? Ask people in your network. Looking for a job? Most people are better off leveraging their real social networks rather than using an existing online job site. What about doing a search on Google for your friend Mary Jane. No, I wasn’t looking for the Urban Dictionary to tell me that Mary Jane = Marijuana. For many queries consumers make today, the collective wisdom of PageRank is of limited value. What if there was an option to do a standard [universal] search or have results filtered through your social graph? Imagine augmenting Ebay’s trust system with your real world social network. How about a payments platform built on your social graph?
The opportunity goes well beyond these obvious ideas. People socialize with each other, in part, because they share similar interests. A system that knows about actions within your graph can increase the probability of delivering a dramatically more relevant experience to you. Imagine going to Yahoo.com and getting the news stories that are likely to be most interesting to you based on actions by users from your social graph. How about a social version of Amazon’s recommendation system for all ecommerce players on the web? In the coming years, developers will use the social graph to replace noise with signal in just about every corner of the web.
Facebook Connect, Open Social, and other efforts are working to allow consumers to use their own social graph on third party sites. I’m not sure if these efforts will work out better than the Facebook Platform or Facebook Beacon, but I applaud Facebook for not being afraid to fail. They are pushing the entire industry to realize the broader dream of social computing.
In the next decade social computing will change the face of the web as we know it today. And smart entrepreneurs and investors will earn healthy returns by challenging [the latest] conventional wisdom.
11 Comments
November 1, 2008 at 9:44 pm
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November 1, 2008 at 11:04 pm
great article, i also believe there are lots of untapped potential in social networks. so far what we’ve done with the existing networks are just groups and showing what we’ve done individually but we’ve yet to see social applications which are powered on friends and contacts’ experiences.
by the way, do have a look at techentreprise.com ; that’s where the website is going.
November 2, 2008 at 6:35 am
Wasn’t Page Rank a proxy for friend recommendations in the first place? Only seems natural to go back to the real thing. I like to think of it as: SNS enables the Long Tail of human relationships. i.e. The number of relationships any one person could maintain was limited because of the friction in doing so, SNS changes the relationship paradigm just like ecom does for niches.
November 2, 2008 at 8:54 am
Web 2.0 certainly has been propelled along the hype cycle to a very high peak of inflated expectations over the last few years. We now see it falling rapidly into the trough of disillusionment. Clearly there is going to be a bit of a shakeout. However we think it will pass through that stage within two years, then start climbing the slope of enlightenment. Web 2.0 incorprates a powerful set of concepts that create new business value. Indeed I think they might be part of what helps drive us out of the recession.
November 2, 2008 at 12:03 pm
Good posting.
I suppose the current move by google to have google user profiles will also finally move into that direction.
November 3, 2008 at 12:39 am
Great post Mike. Reading makes me realize just how at the tip of the iceberg we are.
November 4, 2008 at 5:46 am
I totally agree. Replicating our off-line relationships is so mundane. The power of the Internet lies in its democratization. We need to use this power to *change* the way we connect, and in the process alleviate boredom, loneliness and other social inefficiencies.
Unlocking this potential will be the truly great “social networking” app. What it will look like remains to be seen.
November 4, 2008 at 6:49 am
excellent post right on point and well written.
Now if I could whip out a post like that I’d own
Facebook, cool blog .
Social networking is like the twilight zone.
November 14, 2008 at 12:30 am
yep.
November 14, 2008 at 3:12 am
I really enjoyed this article. I think one of the fundamental problems with networking on the web is that we often combine it with the term “social” which limits the scope of it. It will be awesome to see what the next few years will bring forth
November 14, 2008 at 5:06 am
Mike — great post. Where I perhaps differ from you is when you say: “There is no doubt that we must turn audience attention into revenue.”
Why must we? Sure, social networks need to be self-sustaining. But do they need to be the next path to insane riches a la Google? I don’t think so. And it might even be that the nature of what social networks are doing — enabling friendships — is antithetical to conventional forms of making money. I just posted about this at http://simonfirth.wordpress.com/2008/11/12/why-should-social-networks-want-to-make-money/
If there is money to be made, though, I think it could very well happen in the way you suggest towards the end of your post — using social profiles as a kind of knowledge filter. I can see how that might be done without devaluing the social networking experience itself — which is what I see happening every time someone has tried to ‘monetize’ the networks themselves so far.
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