Is Social Networking a viable business?

This article is targeted at web designers and business owners who are considering an investment in social networking.

Let me just first say, that I have invested in it personally, where I created a video sharing system to help distribute my own content.

… I had other ideas beyond that, but I soon discovered that:

  1. It would require a huge investment (millions) in capitol to just get it off the ground.
  2. That most user contributed videos are just terrible. I deleted most of them.

So, is Social Networking a viable business?

Not for most.

My reasoning can be boiled down to a few points:

  1. There is no loyalty – people will leave the social network for many reasons.
  2. Most of the content is (hopelessly) NOT monetizable, because most of the content is too personal or too crappy.
  3. Even if you have good content, there are so many sites with cooking videos on them (for example) that I can’t see how you can make any real money … too much competition and it cost too much to maintain these sites.
  4. Social networking has a fad like feel to it. Members quickly loose interest in the site.

My last point would seem to fly in the face of the numbers the social networking firms are reporting – you know, increased membership. What I suspect, is that what is NOT being considered, is how many ACTIVE members are actually using these web sites … and for how long?

My personal experience:

I’m not a big social networking kinda guy (I like my privacy and I am not cruising for a date) but I do have a Facebook, Youtube and Myspace profile – I wanted to see what the fuss was all about. It’s my duty as a well informed Web-nerd.

Anyway, what I discovered is a big mess, where each social networking site has it’s own flavor.

Facebook:

College crowd and older. Bunch of people posting random pictures and letting us know about every little insignificant thing about their lives:

– “Nancy is playing with her cat.”
– “John is deciding on what to eat.”
– “Karen is working hard on a project.”

Yea, exciting stuff. And heck yea, I will buy an ad to put there!

One (fleeting) saving grace:

What was kinda cool (at first) was to get into contact with people I hadn’t seen in 15 years. But the coolness of it all wore off quickly – I didn’t really have much in common with these people anymore, except for our past. Besides, there was probably a reason (often times subtle) why I lost contact in the first place.

Facebook Falloff

As I suggested earlier, since creating the Facebook account, I go on once every two months and that is fading fast.

In speaking to some of my Facebook fanatic friends, they all tell me that they notice that most of the old users don’t go on very often. In fact, many don’t check in at all.

… Like the one-hit-wonder pop song, the Facebook lifestyle is quickly loosing it’s cache with many members.

Youtube

Youtube, like the others, has yet to make a profit. Advertisers don’t want to stick ads beside a bunch of crappy videos. Let’s face it, most of Youtube’s good content is the stolen professional stuff that members upload.

Google recently blamed Hulu (a video site put out by NBC Universal and others) for their difficulty in monetizing Youtube. Why blame Hulu you ask? Well, Hulu has all the good content, stuff Google was forced to strip from Youtube.

… I had been wondering for a long while when the major content producers would realize that they DON’T need Youtube or any other video sharing site, to monetize their content on the Web.

Myspace

Myspace has a younger crowd than Facebook … and a bunch of musicians.

My buddy has a Myspace band page. It seems that 97% of his friends (and their friends too) are also in bands … all of them trying to sell their music. A common post on a Myspace page is:

“Dude, I love your music!! You should check out my latest song!”

It kinda reminds me of those young entrepreneur associations, where everyone has got something to sell, but no one has any money to buy anything.

One thing that Myspace has confirmed for me:

There are a lot of unoriginal and moderately talented people out there! That said, perhaps a few might actually get noticed if they used a different computer program to create their canned music. Or better yet, if they learned to play an instrument besides Garage Band.

Conclusion

I think social networking sites will become the loss-leaders of business and I think social networking will fragment into niches.

Like directories, you can now buy ready made social networking scripts/web applications for a few hundred dollars (and for free) and as such, these things are popping up everywhere!

.. Like all those web directories no one goes to anymore.

Best,

Stefan Mischook

www.killersites.com

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This entry was posted on Tuesday, July 8th, 2008 at 3:52 pm and is filed under News, Web Design. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

8 Responses to “Is Social Networking a viable business?”

  1. Camilo says:

    Oh dude, what you say is so true, but let me understand this..if social networking is not the future to monetize then..what is it? I mean, everyone is going crazy trying to make profit on the internet, but besides porn websites, where do we go from here??I thought social networking was the way to go… Maybe we are overvaluing the internet? maybe it’s just the phone system of the future, i mean, the phone is a great invention, but besides telemarketers who would want to use it to make advertising-based profit?? Maybe the value won’t be in the internet itself but the way we combine it with the real world??….i don’t know, i am confused.

  2. People are making plenty of money with the Web and advertising. I just don’t think it will be easy to do with strictly social networking websites – especially expensive to run video sharing websites.

    That said, I think the social-web is here to stay, I just think it will be part of sites that have more to them.

    Just my two cents.

    Stefan

  3. Konnects says:

    great conclusion. What are your thoughts on business social networking?

  4. “What are your thoughts on business social networking?”

    Social networking within a business context is something I have not put too much thought into, nor have I researched it much. As such, I am reluctant to comment.

    Stefan

  5. Rich says:

    Are we going back to the dotcom booming around year 2000 with these social network fanatics phenomenon? I think so. I also agree with stefan that niches are the way to go.

  6. Carrie2 says:

    Adding this to my bookmarks. Thank You

  7. amit says:

    an important opinion!
    all i hear untill now was the opposite.. its good to have balance