Is online networking here to stay?

28-07-2006

by Ciara O'Brien

Social networking may leave many puzzled, but the latest phenomenon to grip the web can't be ignored.

A few short years ago, the idea of social networking online was a distant concept. Although bulletin boards and online communities were springing up, few people could have predicted the whirlwind that was about to hit the web.

Social networking is becoming increasingly popular with younger web users as a way to get -- and stay -- in contact with friends and family. The sites provide an easy way for users create an online presence, and add "friends" to their network.

Irish teenagers have embraced the idea of online social networking with thousands signing up to Bebo, a social networking site aimed at schoolchildren. Another popular choice is MySpace; both sites are aimed at different age groups, but both demonstrate phenomenal levels of success.

Already the Rupert Murdoch-owned MySpace has become the most popular website in the US according to internet traffic measurement firm Hitwise. It confirmed MySpace accounted for almost 4.5 percent of internet visits in the US during the first week of July, beating Google and Yahoo.

At the Piper Jaffray annual Global Internet Summit in California in June, attendees were told that social networking is the wave of the future. Many, however, have yet to be convinced.

So with all the hype surrounding these sites, they must surely be a good bet for companies, right? Murdoch evidently saw promise in MySpace; News Corp paid USD580 million for the site last year. Bebo, it seems, is holding out for more. The company is reported to have turned down an offer of USD550 million, believing that it is worth almost twice the amount.

The key question is how regular firms can make money out of the sites.

One possible option is the knock-on effect from raising a company's profile through MySpace. Already a number of organisations are using MySpace to promote themselves. The Sun newspaper set up a reader network through MySpace earlier this year which allowed readers to create webpages and blogs, and share content such as pictures and video clips -- all through a Sun-branded portal.

And with word-of-mouth marketing considered a viable proposition, the idea that social networking could facilitate this is an attractive one.

It seems that other players have caught on to the concept of social networking as a business model. A new website, Bandwagon.ie, has set-up as a social networking website for independent and unsigned Irish bands. The site has a plan for making money - it allows bands to promote themselves and sell music through the Bandwagon network. This music download revenue is split 60/40 in favour of the artist.

Of course, the most obvious commercial choice is advertising. With the sites becoming increasingly popular among the coveted 16-34 age group, advertising on the sites could be a boon to firms wishing to target the younger demographic.

The success of MySpace and Bebo, while eye-catching, is not new. In fact, the very idea of social networking online is not new either. Friendster allowed users to search for their buddies. It enjoyed large volumes of traffic at the height of its popularity, and even rejected an offer from Google to purchase the company. However, it hit a number of snags -- including sacking one employee for blogging about Friendster -- and there were reports that its USD200 million price tag was slashed by 50%.

Along with this came reports of falling traffic figures, from 1 million unique visitors a month to only just under 600,000.

There is a danger that social networking could be just like any other internet money-making trend -- a fad that will die off in popularity.

One to already suffer this fate is pop-up advertising, which is now largely circumvented by ad blockers, or by web browsers such as Firefox and Opera which include blockers in their software. Other popular applications, such as Friendster, have also found that once the first rush of enthusiasm wore off, people didn't come around as much.

And when popularity and page impressions start to decline, inevitably the advertising revenue will follow.

One key obstacle that the social networking sites will have to battle is user boredom. Although users of Bebo and MySpace currently spend time adding photos to their site, posting comments on each others' pages and making up quizzes, how long they will be content to do this is another matter.

No one can predict just how long social networking will remain a viable option for businesses to promote products and services.

Bebo, for example, has become so popular with Irish teens that the site has been banned from a number of school and college networks. From September, all schools will have Bebo access blocked. The ban's impact on traffic figures remains to be seen.

And it's not all good news for site owners either; the websites have been subject to concerns over bullying and the safety of children who use them.

The advice to firms may be to tread carefully -- and don't depend too heavily on a networking site, just in case it suffers the same fate as Friendster and its ilk.