Social Networking: Will it ever be a huge business?

In a recent article at the Economist, they discuss the current state of social networking. The article began by addressing the fact that ten years ago, email was the huge thing. So the giant web portals at the time were looking for at how to start using it to their advantage and begin making revenue off of them. So when Microsoft bought Hotmail, they expected to receive a revenue stream from their new investment. The return was not what Microsoft was expecting. The article alluded to the fact that this is no different from social networking today. Email is still around and a vital part of everyone’s daily routine, but it never became a revenue monster. Instead, it gathers a crowd of people loyal to the service.

In a sense, social networking is today’s new email. With AOL buying Bebo last month, they’re trying to go in the same direction. So how is AOL going to make profit off of Bebo without infuriating the loyal Bebo users? When people log on to these sites, they’re looking for a connection between themselves and other people. Personally, I feel that this is a thin tightrope and it’s easy to fall off. It also depends on the network one’s looking for a revenue stream on. A new music community is going to be different from Facebook. Even though the advertisements can be extremely targeted, problems will arise.

We all remember last fall when Beacon came out on Facebook. Studies had shown that the new generation entering the workforce would respond better to offers that are recommended by their peers. Facebook’s about face in light of tremendous criticism showed that if you advertise to others without a certain amount of permission, then the backlash won’t be worth the income stream.

So now, I ask you, what do you think? Is it worth it for big companies to roll the dice and expect some profit from sites that simply connect old high school friends?


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