This post is to some degree a response to Robert Cringley's blog this week, in which he says that most of the social networks won't survive for lack of a business model. My two main reactions to that are (1) Duh, and (2) Social networking is a means, not an end.
Firstly, "Duh". In any industry, there are typically 2-3 winners, a few niche players and dozens of losers. When a new industry is born, you get a lot of players, and eventually the best, luckiest, or most aggressive win. It's that way with almost any type of software, service, or product. There's Salesforce.com, and there's ... um... There's Amazon and there's ... um... There's ebay and there's... um... So pointing out that very few social networks will survive is stating the obvious. Now, tell me which one will turn out the winner and you are making a risky prediction.
Secondly, what people don't seem to get about social networks is that social networks, primarily, are a means to an end. Participation in pure social networks like Facebook is declining, because they just aren't all that entertaining. Once you've established yourself on a social network, you check in only occasionally. For example, you might use LinkedIn when you are looking for a job, an employee, or a referral. You might use Plaxo to look up someone's current phone number. And then log out. Facebook and Twitter addicts are a special breed, but they are also quite virtually mobile, so it's hard to count on them.
However, where social networks get exciting are where they are a means to an end. So, if you are listening to pandora, emusic.com , and you start to form a network of friends, you can start to find out what your friends are listening to. In Second Life, or any multi-player online game, you form social networks. You can imagine how this could be useful in a variety of different contexts, where the basic business model is to sell something.
You'll notice that this blog doesn't have Adsense on it. Although I know that reduces my search engine placement (I've written about this in a past blog.), it reflects my basic philosophy that the advertising model is fundamentally hokey.
It simply seems untenable that people want to be bombarded with advertising. The whole scheme on Facebook these days is that you become a "fan" of something, and then something will advertise to you. I joined a fan club of one or two bands and I get their e-mails, which I regularly delete without reading. For a while I had an iLike on Facebook and I could find out where some of my select favorite bands were playing. But the novelty of that wore thin rapidly.
As a long-time emusic.com subscriber, I have 250 artists on my hard drive, and that doesn't include any of the physical CDs I own (though I haven't bought any since the word DRM entered my vocabulary). So if I took an app like last.fm, which detects all the legally purchased on my system (all of my music is), and started to feed me the concert schedule of all 250 artists (minus the deceased), well, no thanks. Come to think of it, no matter how much I love my tooth floss better than any other tooth floss I've tried, I don't want any promotional material from the manufacturer.
In short, I don't believe in the fan-club, advertising model in the long run. There's definitely some money to be made there, but not enough to sustain the social networks on an advertising-only model.