For some, the social networking space looks like
1999 all over again. Back then, at the height of the dotcom boom,
entrepreneurs and their website ideas were ten-a-penny, all promising the
net would change everything. The investors piled in with their money, much
of it never to be seen again.
Today, social networking sites are springing up all over cyberspace, as we
reported last week. Users are pouring in, tapping in their contacts lists
and making connections with friends and complete strangers.
The investors are piling in, too - the last few months of last year saw a
number of social networks win millions in backing. In some of the biggest
deals, Friendster won $13m, Tribe.net $6.3m and LinkedIn $4.7m. These are
not huge sums compared with the mammoth investments of the dotcom boom, but
still represent hefty bets on websites testing largely untried business
models.
Predictably, online dating has emerged as a popular early use of some
systems - especially Friendster - but some commentators are now questioning
the other uses that people will be willing to pay for. They're likening the
rush of investors into the area to the dotcom boom - and are predicting a
similar crash soon.
The big question is: what are these social networks going to be good for?
For Reginald Warlop, a London-based venture capitalist, the value is clear:
one social network has already helped him move across the world and find a
new job. Warlop and his wife wanted to move to London for family reasons,
but had few contacts in Britain. Without his electronic network, the move
would have been far more difficult.
"We had a few alumni from various schools," he explains, "but I started
using LinkedIn as a network to grow my contacts. It was the summer, things
were slow, people weren't hiring and then it's all about insider
connections.
"The network grew rapidly. The ability to have someone provide the
introduction really helped me gain access to people that, otherwise, I'd
never have access to."
Warlop made contact with Julie Meyer - the dotcom-era entrepreneur who
founded and is now chief executive of Ariadne Capital - but the route was
not direct. Because he didn't know Meyer, he had to use his network to find
someone who did.
So Warlop made contact electronically, via LinkedIn, through a friend of a
friend of a friend, thus benefitting from the tacit approval of the people
passing on his name. As LinkedIn founder and vice president Konstantin
Guericke puts it: "It's a human filter, where people put their own
reputations on the line if they forward your request."
It sounds a convoluted way to make a contact, but for Guericke, it is "the
oldest thing in the world". He adds: "Especially as people move on in their
careers, the more senior they get, the more they rely on referrals, simply
because more and more people want something from you. Early on in your
careers, you want things from other people. And then at some point it flips,
and more people want things from you."
And for Warlop, the system worked. "Had I called a vice-chancellor cold
there would have been no context, no trust," he explains. "But having the
insider referral through somebody I knew suddenly made a foundation for
trust. It's a much better start to the conversation."
But isn't all this a kind of "old boys' network" for the 21st century?
Warlop thinks not. "The old boys' network relies on everybody having a
similar kind of profile," he says. But social networks are, he says, "not
like the Oxbridge alumni. It's more what people have done in the past two or
three years that really counts, the contacts they have established, whereas
the old boys' networks might be based on an academic selection process 15
years ago, which is totally different."
Mark Pincus, chief executive of Tribe Networks, says it is all about what
sales people call qualified leads - the pointer that leads to someone who
wants to hear your message. And, with these networks, your message can be
anything: from "buy this" to "buy me".
"Whether it's eBay or Amazon or Google, the business of the internet is
paying to find or be found," says Pincus. "There's online dating: all you
can eat leads, all you can date. Or jobs: $300 a month to Monster and it's
all the resumes you can find, for as many jobs as you want. Paid leads.
eBay: it's paying for a successful transaction. Google: advertisers are
paying per click."
The next big move, he says, will be towards filtering all those leads down
into something more manageable - quality, not quantity, will be the key,
whether in dating or in business. Social networks will be the giant
human-powered filters that, goes the theory, supply you with something
closer to what you're looking for.
Pincus, who recently won funding for Tribe.com from two large US newspaper
companies, perhaps unsurprisingly likens this to a new version of the
newspaper classified advertisment: he calls it Classfieds 2.0. "Jdate [a
site for Jewish singles at jdate.com] is an example of Classified 2.0," he
says. "It shouldn't exist. Why? Because it only has a database of 500,000 -
Match.com probably has more Jewish people than J-date. But because it's only
Jewish people, you feel some sense of a targeted community that you have a
context with.
"People are beginning to see fun, and utility, in having an online community
that can be connected to people and ideas in a more permanent way. Social
networks are like blogging dumbed down for the masses. Social networking
allows you just to take that part of blogging that is 'give me a way to
express myself and have an online identity, and let me control who it's
linked to and how it's found'."
Back in London, Warlop is still putting his LinkedIn network to use, using
it to sound out business opportunities. Only last week, he says, he used it
to gain a "tremendous insight" into a company, which helped him make a
decision.
But - and this is the big question for all these networks looking to justify
their multimillion dollar investments - would he pay for that kind of help?
"Yes, totally," he says. How much? "It really depends on the value of the
introduction," he replies. "But for some you'd really be willing to pay a
lot. When I was at business school, they were auctioning off dinners with
vice presidents of companies for charity. Those dinners went for $500 to
$1,000 - just to have dinner with a guy. These things have value, you know."
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