Magazine article Information Today

Social Networks: The Internet Continues to Evolve: Where Is the Money in All This? That Is What Venture Capitalists Are Asking

Magazine article Information Today

Social Networks: The Internet Continues to Evolve: Where Is the Money in All This? That Is What Venture Capitalists Are Asking

Article excerpt

The flurry of interest in personal online networking parallels what's been going on in the business and activist worlds. The real work in organizations, according to articles in two recent issues of Harvard Business Review, has already migrated from individuals to networks. Social networks are seen as keys not only to individual success, but to achieving organizational goals. To optimize their human "inventory," companies map employees' expertise and take advantage of their professional networks. Small wonder, then, that social network analysis is a growing academic field.

Several theories that inspire social networking are now hot topics:

* Strength of Weak Ties ( dept/soc/people/faculty/ granovetter/documents/The StrengthofWeakTies.pdf).

This site advocates the power of looser connections in open networks to generate new ideas and success.

* Six Degrees of Separation ( 1999_01_11_a_weisberg.htm; Six_degrees_of_separation).

These two sites claim that a person is only separated from any other person in the world by a chain of, on average, five people.

* The Long Tail (http://www

This site affirms the feasibility of marketing niche products to tiny, distinct markets, provided storage and distribution costs are low.

The online application of these theories illustrates a counterintuitive quality of information that was pointed out decades ago by futurist Harlan Cleveland: Information gains in value when shared.

The Search Connection

Blogging brought useful technologies that allow ordinary users to share and distribute content as well as to slice and dice it in innovative ways to the Web. The new social networks enhance browsing and information management capabilities, creating self-selected audience communities and participants. They let users limit the Web's resources without sacrificing its open-endedness and serendipity.

By "learning" from the behavior of users and their affinity groups, San Francisco-based Eurekster, Inc. (http:// uses "community driven search technologies" to rank search results by relevance to member communities and allows customers to share results and knowledge.

Florida-based Multiply, Inc. (http:// uses a different approach. It searches the Internet for content published by those in one circle and rates the relevance of hits by "degrees of separation" between publisher and searcher.

"Tags," such as those featured on the Technorati site (http://www.technorati .com) and to a certain extent social networks, generally help Internet users employ friends or colleagues whose judgment of resources and selection of friends they trust as filters.

The Profitability Challenge

Where is the money in all this? That is what venture capitalists are asking. So far, the answer isn't clear.

User fees have not been significant revenue streams for most social networks, although that might be changing. LinkedIn, for example, now charges employers that list jobs on the site.

Since advertising is an increasingly important part of Internet revenues, a "business" benefit of social networks might be revenues earned by aggregating audiences for advertisers (in other words, adhering to older media revenue models).

Another route to profitability might be figuring out how to capitalize on a powerful marketing force--positive word of mouth.

Online networking is already being viewed as a benefit to print and online publications and conference planners. Check out the Web sites of forward-thinking organizations like Always On (http://www, Red Herring (, and The Push Institute (http://www.pushthefuture .org/PUSH_INSTITUTE.asp) for innovative ways to involve subscribers and conference attendees in building membership communities. …

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