Lessons Not Learned
The Wall Street Journal has a few pieces this morning discussing social networking and the return of venture investing to the consumer Internet. The primary story has quotes from John Doerr, Bob Kagle and me (hey, I keep good company). Let's play identify who said what:
a) "[Friendster is] obviously growing by leaps and bounds and spending no money on marketing... That they're using very powerful human relationships to connect is really at the core of what makes this for me quite compelling."b) "If you've got this level of engagement, and people spending upwards of an hour at a time [on the site], that will translate into a set of economics that will support this business model."
c) "Does it feel like 1999 again?... In social networking, yes. I haven't seen anything like this in four years."
Well OK, so any regular reader of VentureBlog knows that I'm a sceptic on the space and can figure out that I'm the author of quote c (for the record, a is from Doerr and b from Kagle). Far be it from me to question the investment wisdom of those two gentlemen... they were investing in tech companies when I was still in high school and have two of the most enviable track records on Sand Hill.
You never know... maybe 1997 was the beginning of a long boom (happy 6th year anniversary!) that will push its way into our daily lives and change social networking as we know it. And of course, make money for everyone.
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Powerful Connections is another Wall Street Journal article on Friendster. This one focuses on the attraction of venture capital. Venture Blog has a great little rant on these articles (and other good links and business comments)... Read More
For those of us without WSJ subscriptions, you can ready the article here:
http://interactive.wsj.com/fr/emailthis/retrieve.cgi?id=SB106746372523968700.djm
The article makes it sound like Andrew is more positive on this space than the quote up above (out of its context) does. Especially when they mention that he's invested in this space (EMode), though they explain that it was an early investment (2000), and that the company actually had to survive through the crash and find a working business model (and is making money right now).
It does sound familiar, but I hope that many new e-businesses can launch now and in the coming years, but with investors and founders looking very carefully at creating revenue and eventually profits.
Derek
Social networks in the enterprise can actually produce tangible results. Just think how much business is generated in selling leads. In my industry alone selling leads is a $300 million dollar a year business. Currently, leads are generated manually by entrenched companies using existing social networks.
AUtomating this will have to displace many entrenched large companies.
I think its becoming increasingly clear to all observers and participants of the space that people aren't willing to come together to make a new community unless there is something to do there (and making a profit is probably the number one thing that people want to do). Friendster made a mess of this a long time ago when it failed to deliver on its mission to hook people up with friends-of-friends. It has settled into the niche of hosting one-page websites for people to browse and search through easily. I smell no big bucks there...
I agree with Jacob - I don't smell the money.
I tried out Friendster out of curiousity and found it essentially a meat market for the 20-something crowd. Are VCs going to see a huge return out of a dating service - I don't think so.
I am now trying out LinkedIn. While definitely business oriented, I don't exactly see myself ponying up money to stay on it, or putting on my entire rolodex for others to use for lead generation for free. The value of networking - of giving others access to your rolodex - it to get a return on the favor one day. And if it is all out there for the world to see, the value of that rolodex goes down to about nil.
I'm interested in the distinction between social software as a technology/platform and social software as a service. I see that emode has added a social networking feature that seems well-integrated with the rest of the site. While I'm not optimistic about stand-alone social network sites, they can serve a purpose as a new version of message boards, listservs, etc.
Also, I'm trying to figure out the whole potential of social software in the enterprise space...lead generation is one app that has some promise. Also affinity marketing. And as a means of organizing "communities of practice." So while Friendster may not be worth much as a dating service, it could serve other purposes...
The immediate two comments above seem to hit the mark. I signed up for LinkedIn a few months ago. While there is an occasional enquiry looking for a business opportunity being sent my way, there is a hollow silence as far as usable interaction is concerned. On a higher level, we all just might learn a lesson from these experiments that we need to re-examine the very concept of networking and define it at a systemic level (it's a serious exercise with a promising business potential, so I won't say more:-))
Raj
I too, like Director Mitch, have started using the business networking services out there like
ryze, linkedin and itsnotwhatyouknow. While I haven't spent any money yet, prices are low enough that putting down $50 to help earn business is a low cost... that is, after I see a potential.
B.N.
Ryze's great. Paid the $10/mth subscription and walla, I am able to search the database by company name. Have made a lot of new and valuable contacts that way. However I've noticed one thing, the users representing more well known companies tend not to reply to my messages, and I'm assuming its because of the barrage of paid subscribers trying to contact them. So there may be a question of scaleability here.
BTW David, I've saw your "skepticism" during the VentureFinance Sig a few months ago and am looking forward to see that very same skepticism again next week at the IBD shootout :)
-- Justin