October 20th, 2007
The Economist recently offered a measured look at social networking, social graphs, and Facebook that we found interesting. While noting Facebook’s two genuine breakthroughs (namely, letting outsiders write programs and keep all the advertising revenues these might earn, and its “mini-feedâ€, an event stream on user pages that keeps users abreast of what their friends are doing), the article wisely identified an important limitation of social networks when compared with older sorts of network, such as the postal or telephone systems:
“…unlike other networks, social networks lose value once they go beyond a certain size. “The value of a social network is defined not only by who’s on it, but by who’s excluded,†says Paul Saffo, a Silicon Valley forecaster. Despite their name, therefore, they do not benefit from the network effect. Already, social networks such as “aSmallWorldâ€, an exclusive site for the rich and famous, are proliferating. Such networks recognise that people want to hobnob with a chosen few, not to be spammed by random friend-requests.
This suggests that the future of social networking will not be one big social graph but instead myriad small communities on the internet to replicate the millions that exist offline. No single company, therefore, can capture the social graph….
…So are Facebook and its graph really worth many billions? From an advertiser’s point of view…Facebook is so far anything but the new Google. The search giant does have traditional network effects in its advertising system: it aggregates advertisers and sends them to potential customers who have expressed specific intentions by typing search queries. But Facebook has only “large crowds who are communicating without expressing specific interests  On Google, advertisements are valued; on Facebook they are an annoyance that users ignore.
Facebook might nonetheless be suited for other sorts of marketing…brands need to design “experiences†that use the social graph to engage groups of friends. If a wrestling association, say, wants to drum up ticket sales for an upcoming bout, it could build a widget that turns users into wrestlers and lets them fight bad guys and win gifts, while making them aware of the brand and the match…”
This entry was posted on Saturday, October 20th, 2007 at 4:56 pm and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
