ReadWriteWeb has a good piece on the future of social media:
Social networking is at a major fork in the
road. Down one road is adding more features to a walled garden and
opening up just enough, so that users seldom need to leave. Most sites
are going down this yellow brick road
and the prize is clearly a big one. But they may end up back in Kansas.
Down the other road, lies a future of being the primary repository for
your connections (aka the social graph), but with this data available
via open APIs to anybody who needs it. That is a utility type model,
and as with any utility, it can be hugely valuable at scale.
Deciding which path to take is a real decision. A botched choice will likely end in failure, albeit via a long, slow decline.
The problem with the first road is that it relies upon a revenue
model that is native to social media. What revenue model works for
social media? The assumption is advertising, but CPM comes from
traditional mass media and CPC is ideally suited to search. Where is
the ad model that is native to social media? At the moment we are
force-fitting CPM and CPC into social media for want of anything better.
Some might argue that there is no ad model for social media. We
don't have an ad model for telephones, afterall, and that's a two-way
communication medium like social media. Ominously, we didn't have an
effective ad model for email, which is the earliest form of social
media, until Google treated email as just more search fodder for CPC.
If social media is not funded by advertising, it must be funded by subscriptions or transactions. Neither is easy.
Read more here. Against this backdrop there have been a couple of developments in the social media world over the past few days. First, the Google-Facebook arrangement has collapsed:
Google Inc.'s announcement of a service to "make the Web more social" was decidedly casual, or staged to seem that way.
Standing beside a campfire, the company's engineering director, David
Glazer, explained how, through an agreement with Facebook and similar
sites, the effort would serve a primal human need.
"We all like huddling around fires, and huddling around food and
talking to each other -- people are social," Glazer, dressed in a
red-checked shirt and sneakers, told about 100 people gathered outside
the company's headquarters in Mountain View, Calif., last month. "With
Friend Connect we are trying to make that happen everywhere on the Web."
Within three days of the campfire, a dispute erupted between Google and
Facebook, its largest partner in the new service, that reflected the
fact that for Web companies there is nothing casual about the business
of Internet socializing.
There's too much money, maybe billions, at stake.
Facebook, the burgeoning social network, abruptly withdrew its support
for Google's Friend Connect, meaning that none of Facebook's tens of
millions of members could sign on to websites using Google's new
service.
Coming so soon after the highly publicized launch, it was an embarrassing rift.
Read more here (from the Los Angeles Times). Second, a report suggests that the web will be dominated by two players - Google and Amazon:
An Internet analyst for a major Wall Street firm argues in a new
report that Google Inc and Amazon.com Inc will be long-term winners,
while Yahoo and IAC InterActiveCorp fall by the wayside and eBay Inc
becomes a merger target.
Sanford C. Bernstein analyst Jeffrey Lindsay argues in a 310-page
report entitled "U.S. Internet: The End of the Beginning" to be
published on Tuesday that Google and Amazon are best placed to
withstand the current economic downturn.
"We expect two players to continue to perform strongly, Google and
Amazon," Lindsay writes. "Both Google and Amazon.com are still racking
up annual growth rates in the 30-40 percent range, with only a
relatively modest slowdown in sight."
Lindsay reiterates his previous positions that Yahoo eventually will
be sold to Microsoft Corp and that Barry Diller's IAC e-commerce
conglomerate will go ahead in August with its five-way split-up, as
planned.
"Arguably the weakest players have strayed furthest from their
original competences and have been operating largely as conglomerates,"
the Bernstein analyst says of Yahoo and IAC.
Read more here (from Reuters). And finally Microsoft is wanting the a piece of the web action:
Lloyd Braun–the former Hollywood super-programmer turned Yahoo entertainment czar turned Hollywood and
online programmer–has signed a multimillion-dollar deal to make an
original destination site for Microsoft’s MSN portal, aimed at
aggregating celebrity, entertainment and pop culture news, according to
several sources.
With the still-unnamed site, MSN plants its own Paris Hilton flag in
a very crowded field, which has numerous competitors such as
People.com, PerezHilton.com, AOL’s TMZ.com, PopSugar.com and Yahoo’s
OMG.
It is also interesting that Microsoft (MSFT), which has focused its
efforts of late on its technology, especially related to online
advertising and search, is making another foray into the content arena
via MSN, where it has had mixed results in the past.
Read more here (from All Things Digital). But returning to ReadWriteWeb, Bernard Lunn offers a way for the future:
Here is my take on which road the big social networking sites could take:
- MySpace could potentially get away with the walled garden approach
for a pretty large mainstream market, using music as the fundamental
draw and later leading into other arts and entertainment. This makes
MySpace less age-dependent than Facebook. Everybody loves music, art
and entertainment, from pre-schoolers on up to grandparents. News Corp.
is a media company through and through, so this route is in their DNA.
- Facebook will have to become a utility for the world or a niche
walled garden for college kids. Their DNA is too young to predict which
way they will go. Both are viable, but neither will justify a $15
billion valuation, so they won't make this decision until new
management steps in following a crisis. They cannot become a walled
garden for the world, because their core community - college kids -
will move into the world of work where they have to communicate in the
wider world of the Internet. Once they have left college, their only
connection to each other is as alumni and that ends up being a
relatively weak connection as we grow older (despite what every
generation believes when they are at college).
- LinkedIn has a shot at becoming a mainstream, but work-centric,
walled garden since the working world is constrained enough and follows
well-defined conventions. LinkedIn is the network I use regularly and I
have written about it before
many times. They have now reached the stage where if they offered
webmail that was as good as Gmail (and obviously as open as any
standard webmail), it could become the default hangout for biz types.
"Suits" could gradually stop talking about "living in Outlook" and talk
about "living in LinkedIn." Add in some simple RSS-based startpage-like
functionality and LinkedIn would be the place to start and end the
workday. Biz people will pay a reasonable subscription fee - say less
than $100 a year - for a package like that without any advertising.
That is a bit of a stretch from where LinkedIn is today, but
fundamentally viable in my opinion.
Clearly, any venture that succeeds in building a mainstream walled
garden will become hugely valuable. They will effectively become the
Internet for millions, which might even justify a $15 billion type
valuation. The problem is that it is a very, very hard road to navigate
successfully.
The mass-market utility model could also be hugely valuable at
scale. My simplest description of this would be "social graph +
communication tools." The communication tools could be email, SMS,
VOIP, poking, walls, vampires, whatever turns people on. The social
graph is the spam controller and way to make connections. The obvious
players here are the vendors with big email networks - Google, Yahoo!,
and Microsoft (GYM). This is the background story to all the M&A "sturm und drang."
The one company that most needs to make this strategic decision -
Facebook - is the one that is most constrained by that paper valuation
of $15 billion. Neither route - niche walled garden for college kids or
mass-market utility going up against GYM - will justify $15 billion. So
they have to pretend that mass-market walled garden is viable, even
though nobody believes that anymore. That is one nasty dilemma. Do you
think Microsoft knew that they were giving Facebook that nasty dilemma
when they agreed to a $15 billion valuation? Gates and Ballmer are
smart enough, in my humble opinion.
The mass-market utility model will win out in the end for 3 reasons:
- The social graph is so closely linked to communications, which has always been a utility model.
- The ownership issues around the social graph are murky. A utility
skates past that problem, saying "you own, we manage." AT&T does
not own your Rolodex, or insert ads when you are calling Mom because
they own your connection to Mom.
- The social graph has to be monetized in creative ways and the best
way to make that happen is make it available to all the entrepreneurs
and established businesses, on clear and simple terms.
The mass-market utility model will work through an API. That sounds
similar to what is already out there, but with one big difference. The
current APIs are all about getting your apps INTO a walled garden, or
two or three walled gardens. The utility API will be about accessing
the social graph, getting the social graph OUT of the utility and into
your application, for some pre-defined cost. What you do after that is
entirely up to you.
Read more here.
