Tuesday, March 03, 2009

Thoughts on Twitter, Facebook, MySpace, Linkedin...

Some of my research deals with communities - specifically those that are involved in developing open source products such as Linux.  My first published paper proposed a model through which the social capital of developers in such communities might influence the success of open source projects.  As an analogy, consider how things an entrepreneur starts might be successful based on who he is connected to in the VC network.  Makes sense, I hope.

In the following years I also followed developments among other communities a list that included Facebook, Wikipedia, Orkut, Linkedin, MySpace and Twitter.  I was never too impressed by MySpace or Orkut because they seemed like glorified personal webpages to me. I watched aghast as Murdoch's empire paid a huge sum for MySpace without a proper plan to monetize the value that resides in this community.  My curiosity in Linkedin is driven by how well their niche positioning paid off in creating a revenue model driven by subscription and focussed services to recruiters.  Further, they have also managed to generate a wealth of knowledge through their section on Q&A.  Facebook ha sits pluses and minues.  I see their ability to provide interfacing applications as the killer proposition; their inability to figure out an optimum way of leveraging the community connections to provide value for marketers is troubling.  Twitter - seems too superficial to become anything.

My favorite is Wikipedia.  It is a hybrid model with some rules and norms in place, yet it thrives on self-policing and self-organizing capabilities of organic networks.  Further, the underlying purpose of providing a platform for all the world's knowledge is huge and has no ultimate end to it.  That will keep Wikipedia goin on forever.  Wikipedia is also closer to home - open source crowds that participate without an expectation for monetary reward.  Manye have brushed aside such community models where there are no incentives to participate, only to watch in dismay as these models became successful.  Now, they scramble to explain why these models work.  They need to read Richard Stallman.

Networking sites need to figure out how to monetize the crowds.  Where there is a clear proposition, as in Linkedin, I see a great potential.  Those that lack focus and are merely meeting places for a lot of youngsters are flirting with financial doom.  There will be carnage in the social networking world and only few sites will survive. I am betting on Linkedin.

5 comments:

Z said...

"I watched aghast as Murdoch's empire paid a huge sum for MySpace "

I'd say that your definition of "huge sum" is far different from the market's.

Fox's $600M acquisition of MySpace is seen as a big time steal. You do know that soon after the acquisition Google did a $900M ad deal with MySpace?

Additionally, in MySpace Fox has found an effective way to market new movie launches, plastering the posters across the site.

Further, you can find lots of notes of disappointment and regret from the myspace for having sold it for such a low price(in hindsight, of course).

Z said...

from the myspace founders*

Girish Mallapragada said...

@Z..

Appreciate your comments on m blog. If you really are who you say you are I am honoured.

However, your comment by itself will not change my opinion. I do not see a clear plan as to how myspace would be able to monetize the value in the community. There is no unique value proposition, so to speak - at least based on the much touched social community dynamics the site is based on.

Don't get me wrong - I believe in social networking and its potential to change our world. However, The websites that will stand out finally are those that merely do not exploit communities for the fantasies of the advertisers but figure out how to provide value to both sides of the equation. I wish you the best.

Z said...

Prof. Mallapragada,

I think as a purely business decision, the acquisition was a homerun for Fox, if for nothing else, for returning couple hundred million in a matter of months. (sold: $580 mil, google ad deal few months later: $900M).

There is more room for debate about the future sustainability of these social networks. What we have right now are a few distinct market leaders: facebook for personal social networking; myspace for entertainment; linked in for business. I think going forward, each will try to make inroads in the others' market, mostly unsuccessfully.

But I'd be cautious in blindly labeling myspace's commercial-anything-goes-culture as "exploitation". If what myspace was doing was ONLY or primarily exploitation, as you seem to suggest, shouldn't it have been long dead or shown SOME sign of decline in a market full of alternative social networks?

I'd argue that MySpace *is* providing value to both sides of the equation: entertainment to consumers, and marketing of the entertainment to the advertisers. I'd say that is a pretty win-win situation.

I personally have infinite dislike for myspace. But I cannot help respect Fox's early acquisition and ability to derive real value.

Girish Mallapragada said...

@Z...

valid points. However, Google's investment by in and itself does not justify the long term value of myspace. Google has bet a lot on many things - 1.5 billion on youtube as well. I might as well stay on the sidelines watch the whole thing playout and then call for the winners.

Maybe exploitation is a loaded word - but what I was hinting at was that social communities are not merely blobs of people to be shown ads, and counted as target audience to make money.

The value of such communities is obvious to marketers. However, unless a coherent plan that identifies specific means of identifying opinion leaders and influencers in the community - the community blob itself is almost useless.


I do not buy the argument that just because Fox and Google paid a lot of money there must be something going on there. These bets are made based on "potential" rather than "true" value.

I buy your logic that myspace is different from facebook and linkedin. However, the uniqueness itself is meaningless if it does not lead to a revenue stream that is backed by a plan that is not completely dependent on ad revenues. I am limited in my knowledge, but knowing what I know about the dynamics of social networks, fine grained plans that leverage the "network" are more important to monetization of the community. I don't see that happening in myspace. Maybe I am wrong - take it for whatever it is woirth.

I want to be proved wrong as I want social networking to succeed. It is just that in its current form myspace is not yet there in terms of long term value.

Finally - I just don't like Fox.