Social Networks, Digital Expression and Similar Business Plans
Posted on May 30, 2006
Robert Young has an interesting post on the GigaOM blog where he explains how social networks enhance self-expression in a brand new way.
It's crucial to understand that social networks are architected to help scale self-expression to new heights, both in terms of the extent of self-expression as well as the reach of distribution (e.g. number of "friends" and the effects of the whole six degrees of separation thing). A simple example... a person on MySpace can have thousands upon thousands of friends. This was not possible before the Internet, and even prior online communications & community innovations like email, chat/forums, and IM didn't truly enable this kind of scale. Moreover, a person can now express him/herself with multidimensional, multimedia depth via text, photos, audio and video... again, to a degree that was not really possible before.
To some extent, self-expression should be viewed as a new industry, one that will co-exist alongside other traditional media industries like movies, TV, radio, newspapers and magazines. But in this new industry, the raw materials for the "products" are the people... or as Marshall McLuhan might say, "the people are the message" when it comes to social networks. So for any player who seeks to enter this industry and become the next social networking phenom, the key is to look at self-expression and social networks as a new medium and to view the audience itself as a new generation of "cultural products".
Robert Young's post discusses people on MySpace having thousands and thousands of friends and being unable to do this in the real world. Companies that can provide something online that does not exist in the real world have been successful online including big companies like Amazon.com, Ebay and AOL, so maybe one or more of the social networks will become a major player? Of course, companies like Amazon, Ebay and AOL actually sell things: products, auction services and subscriptions.
Scott Karp says Show me the Business Model and notes that everyone's business model today is "gather audience, sell advertising."
So far nearly all the Web 2.0 models focus on bringing in revenues by selling ads. Some of the Web 2.0 start-ups even focus solely on contextual ads. A lot of these companies will fail beause they are going to run out of money before they ever get enough advertising revenues to survive.