The Future of Social Networking Sites

I might as well go public with my views on this, since I've been talking about it offline for a few weeks now...you've probably read someone else who's said the same thing, but I haven't come across anyone yet. Here goes...

Social Networking and "Web 2.0" sites are in vogue. The attention isn't unjustified because of the following reasons:
  1. Web 2.0 sites involve the users, who help it grow
  2. Credibility gets transferred from the users to the site, and word-of-mouth is the chosen mode of promotion
  3. Because of relatively greater involvement, these sites have greater advertising potential, as well as (usually) more demographic data to support advertising allocation.
  4. Web 2.0 sites are addictive. Period.
Consmer Trends:
Revenue models vary. There're a large number of Web 2.0 sites around, particularly in the social networking space. Consumers will display the following trends, particularly in the social networking space:
  1. For general purpose social networking, they will flock to the larger sites. I mean - how many social networking sites would you like to be a part of?
  2. From these will develop social networking sites based on the policy of exclusion because it won't be possible to compete with the big guys in the general social networking space. Exclusion will be either by:
    • Segmentation on a monetary basis - VIP rooms, Super Deluxe packages etc.
    • Segmentation based on other critera - Occupation; Specific facility provided by a site (like freelance work, event info etc); Specific interests like art, cars or movies; Sexual Preferences etc.
Again - how many social networking sites would you like to be a part of? Point two above relates primarily to segmentation, which is a direct consequence of growth where no one really wants to be a me-too site. The more the number of sites, the greater their need for differentiation, (update:) hence the development of other Web 2.0 sites that don't rely on social networking. However, there's always the threat of successful social networking sites (particularly Orkut) of providing additional facilities to their users.

Eventually, because several sites are in direct competition, consolidation is bound to take place. Niche advertising revenue split across five sites doesn't help any. So, for example, four mobile development social networking sites on Windows, Symbian, J2ME and Palm OS might join together to form a mobile enthusiasts Web 2.0 group.

In the end, only large general players like Orkut and Hi5 will remain, or focused, smaller, exclusive and consolidated groups like a Carpentars United (silly example, but you get what I mean).

Anyway - this is just a theory, and is open to questioning, discussion and ridicude. I'm thinking of starting a little blog that reviews my favourite online businesses to help improve my understanding of the online space...

Update:
  • wrt software development, Narayan Murthy says that there's opportunity in niche, because one can't compete against those with financial muscle. For the social n/w space, I've observed a similar trend (but for different reasons) in point 2 of consumer trends (above).
  • Business 2.0 gives you a Web 2.0 tour. Nice. Note that very few of the sites featured are social networking sites...
9 Comments:
Blogger Straight Curves said...

ummm...what are 'web 2.0' sites?

August 10, 2006 2:41 PM  
Blogger Nikhil Pahwa said...

Well, Web 2.0 represents a paradigm shift in the way business is conducted online. Mostly, it now represents businesses that have a collaborative, user-driven way of functioning. It's an idea that is spreading to other domains as well - look at CNN-IBN's 'citizen journalist' idea. You make a user a part of the system.
Capisch?

(That's what Web 2.0 means to me...there's a lot of confusion and debate. Some clarity here.

August 10, 2006 9:27 PM  
Blogger Straight Curves said...

erm...I 'capisch' you using a lot of jargon, alright! You marketing thoroughbred you! :D

August 11, 2006 2:03 PM  
Blogger Nikhil Pahwa said...

ouch ouch ouch. I try to avoid jargon, but I guess I can't explain ny views without using terms like segmentation. Word-of-mouth is better than viral marketing, yes?

verfication code: jstbbc

August 11, 2006 8:32 PM  
Blogger illusions said...

I learned something new...and since you seem to be such a techiw how about helping me create a travel blog sort of a thing? Am struggling with a template that can have categories.

August 13, 2006 1:06 AM  
Blogger Nikhil Pahwa said...

Me, Techie? I just observe businesses and trends.

About categories - I actually do have a solution, that I've been looking to implement at mixedbag and doingdelhi.

Register at del.icio.us, and create your own tags. Manually tag each post after you've posted it, and post the category name in your sidebar.

Falstaffhas implemented this. I tried with technorati, and it failed. Now, there's no time to categorise each post.

August 13, 2006 2:49 AM  
Anonymous bewra kekra said...

For illusions:

Or move to Wordpress and save yourself much maatha-pachchi.

August 13, 2006 3:05 AM  
Anonymous Anonymous said...

Nikhil - in your examples you have picked websites that are not purely commercial in their focus. If you consider LinkedIn or eCademy where grown-ups go to do more than Hi5 their friends but make useful contacts, search and advertise jobs etc, you would have different views i imagine. LinkedIn however does not do anything that sixdegrees.com - a Web 1.0 website way back in 1995 or so - did not do, except have a clear revenue model. Sixdegrees.com was ahead of its time :-) And you were at school then but of course I knew you then but for now I shall refrain from saying more as I am posting an anon note

August 14, 2006 6:37 AM  
Blogger Nikhil Pahwa said...

Anonymous: I haven't elobrated on "Segmentation based on other critera", but that is what you're talking about. I can give examples, if you want:
1. SEraja, illaka, eventful and several others are event related web 2.0 sites that offer limited interaction between users, but that could be evolved.
2. Occupation - ryze and linked in. Even rediff connexions, which never really took off. jigsaw might fit this criteria
3. Freelance work - scriptlance, guru, elance, rentacoder...

In my opinion, this segment is most likely to survive...sites that can really work are of the b2m type - business to money...sites that help users make money and grow in the process. Ebay is a marketplace and a community.

Social networking sites will evolve models that will help users make money, and will be in direct competition in this space. Watch for consolidation after the weaker pieces fall off.

August 14, 2006 7:46 AM  

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