How long for the social network bubble to burst? Market forces are working on it. First, last year’s fiasco of Beacon — Facebook’s behavioral advertising system, massively rejected as soon as introduced. Then, audience numbers reach a plateau, at least for MySpace, still the leader of the pack. Now, uncertainties about the business model are looming, with the increasing suspicion of a triple flaw.
One is the tendency to replicate ill-fated online models: Compuserve, early AOL, Prodigy. They were walled gardens, not interconnected systems. They simply died of it, as recalls this opinion piece in The Economist (the business magazine is not exactly embracing the social network frenzy). That’s why platforms like Open Social, the setup conceived by Google poses a threat for current social network players that won’t adopt it. An example: Facebook applications must be written specifically for the platform, using its own markup language, its own query language (see here a demo on how Open Social works ).
The second question addresses the notions of network / applications / features. See what Charlene Li from Forrester Research says in the Economist: The destiny of most services embedded in social networks is to become simply web-based and no longer be tied to a specific network. “We will look back to 2008 and think it archaic and quaint that we had to go to a destination like Facebook or LinkedIn to be social. [Future social networks] will be anywhere and everywhere we need and want them to be.”
The third flaw is simply time allocation. It is a fact that the use of a social network tends to drop fairly quickly after the discovery phase. Only the flow of newcomers helps to sustain growth in pageviews. But as the web is becoming deeper and richer, who wants to spend hours a month to have a virtual beer with a pal? How long will last the novelty effect?
That leads to the business model questions: if the users, in a flash of common sense, reject the behavioral-powered ads; if the applications tend to work outside the proprietary platform; if the click-through rates keep falling… How sustainable is the bizmodel?