Blue Screen Of Duds

Where the alter ego of codelust plays

Social networks are bound to fail in the long run

with 4 comments

While they seem to be the toast of the online world, it is only a matter of time before the social networking websites start losing their sheen and the crazy valuations they command these days.

The lifecycle of social networking activities on individual websites can be mapped under the following heads:

Insertion: Social networks are very much like nightclubs and if you have ever been a regular clubber, you would know that not all nightclubs are created equally.

The newer and fancier clubs are where most of the cool crowd will always head for, while the less exciting ones go away pretty much unnoticed or end up serving niches that never scales up either in terms of traction or in terms of revenue.

More often than not the case for being at a new club is to be one of the first ones to get in, granting those who manage it a feeling of exclusivity. And at least in the early days insertion is much more important than the stages that follow after it.

You can see the same behavior in the case of social networks. Both Orkut and Facebook have benefited enormously from the same exclusivity as a result of their restricted entry policies in the early days.

Replication: Once an individual joins a social network, he/she wanders about replicating connections they already have in real life. There are exceptions to this behaviour, especially in the dating, younger demographic. Quite a bit of the initial spurt of activity on social networks is just this – replication of your existing social graph.

Discovery: While almost every online social network is similar to the others, they also have their own little unique ways of doing things. For instance, you “scrap” on Orkut, “poke” and “banter” on Facebook. Everyone has their own little unique way of doing things and these days, with the introduction of various platforms, there are also truckloads of applications, alongside new users to discover on the social networking sites.

The determinants

Degree of participation: Each of the above three points have degree of participation numbers attached to it. Growth on social networks slows down primarily when the number of people being inserted (new registrations, invites) decline. Secondarily, growth also slows down when the replication is mostly done with as everyone you know is already on the network by then.

To counter this, social networks may try and induce more participation from users by rewarding more participation (like a more frequently updated social stream). This can end up being a counter-productive approach, with high risk of alienating the less-frequent users.

Degree of fulfillment: All three factors can also be measured in terms of fulfillment a user gets from them. When you join, (the insertion stage) has a high degree of fulfillment attached to it, which declines over time when it is not that cool anymore, it is not that new anymore.

Replication also has high fulfillment in the initial days, getting more people on to the same platform etc. But it comes at a price. After a while, everyone you know is on the same network.

Moreover, everyone being there also deprives you of privacy. With time, you need increasing degrees of effort to maintain your profile. It is not uncommon to see users withdrawing more and more from doing things which is reflected in the public activity streams.

Gradually, everything moves to the inbox and private messages, which is a need that is already excellently served by email.

Discovery also has a high degree of initial fulfillment with users finding their way around the new websites, exploring new applications, features and people. Eventually, users get bored of using the applications and they have already added most of the people they have wanted to discover and add, resulting in falling rates of fulfillment as time progresses.

The Eventual Failure

As demonstrated above, there is little use case for sustained high levels of usage on online social networks. Over time, it is hard to battle inactivity and increasing levels of boredom for existing users.

To offset this churn, and also to prop up their stellar growth numbers, it is imperative that these websites keep adding a steady or an increasing number of new users all the time. But that number is a finite figure, determined by the number of people who use the internet and not all of them are going to sign up with social networks.

Unlike a Digg, Gmail or a news website, the value addition accrued from sustained usage of social networks is comparitively low and the need that it addresses is fairly artificial.

Another major issue of privacy and it is an issue without having to bring something like Beacon into the equation. If you do not fine-grain access control on your social stream, it is hard to figure out who all are getting to see what all parts of your life.

And if you do fine-grain access controls on social streams, it is either too much of work or it ends up being a better deal to use specialized services for it (email for communication, Flickr/Smugmug/Picasa for photo sharing, WordPress.com for blogging and so on).

Lastly, advertising inventory on social networks has till date been a major failure. Google tripped on the expectations it had from the Myspace.com inventory, advertising on Facebook or any other social network has not taken off much and the click through rates have been pretty poor on them. Unlike search or news, users don’t get on social networks to find ancillary information related to their activities. You don’t have to try too hard to imagine why there is not much context to one person poking another. It is, well, just a poke at the end of the day.

Eventually, even nightclubs need to reposition and redefine themselves every couple of years to stay in the game. Unfortunately, that is not an option that online social networks get to have and that is what will kill them

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Written by shyam

March 10, 2008 at 10:07 am

4 Responses

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  1. The missing factor from (most of ) the social networking sites is usefulness. On that count, probably, linkedin scores better than other fun sites. They have a better chance of survival whenever the tide turns.

    Shashi

    March 10, 2008 at 8:32 pm

  2. […] social networks the flavour of the season? Or are they here to stay? Shyam thinks not and likens them to nightclubs… Social networks are very much like nightclubs and if you have ever been a regular clubber, […]

  3. It’s 1 month you posted this blog and there are only 2 comments. People are not even searching “Social Network” any more ;-).
    But i surely believe your thoughts are little outdated. If you have written this blog say 2 years back, i would have personally called you and congratulated you. Now you are doing what everyone is doing, it is easy and you can even borrow arguments :-).
    I suggest don’t loose hope, this Social Networking on web as a concept is hardly few years old, there will be some very focused & smart adaptation of this concept. Believe me one is already here on my table.

    Satish Sharma

    April 6, 2008 at 1:53 am

  4. Satish,

    If I had known about this two years ago, I’d not be writing about it, but doing something else that would be much more profitable :-)

    But you are right, the sentiment is nothing new, almost everyone with even half a brain is saying the same thing.

    Agree that someone will out-innovate (there is not much of it out there anyway) existing players, but it certainly is not friendfeed that will do it.

    Thanks for your comments!

    shyam

    April 6, 2008 at 7:09 am


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