How do online social networks survive the end of Bubble 2.0?

Bernard Lunn writes, "Consumer media depends on advertising and advertising gets cut in a recession." So what happens to all those social networking sites that are already having trouble "monetizing" the users? If you're connecting the trend of advertising moving online to the trend of social networks gaining users, and expecting the ad money to make the sites pay, you're probably in for a surprise. Making big money from social networking online is an old idea, and it doesn't work. See theGlobe.com and Friendster. So Lunn poses a good question: what happens to all those places to have conversations online when Bubble 2.0 pops?

First of all, compared to journalism, retail or search, a well-designed social network site is cheap to run. Look at Livejournal or Slashdot. Those sites got stared when web costs were an order of magnitude higher than they are now, and broke-ass hackers could afford to do them then. So the question isn't how can a social network site make New York Times, Google, or Amazon money. It's how can a social network site make a few bucks per user, enough to keep the webmasters fed and the servers on? Easier problem.

And here's one possible solution. Obama's 'Gigantic' Database May Make Him Party's Power Broker. Christopher Stern at Bloomberg News writes, "When supporters join mybarackobama.com, they become part of the campaign, gaining access to phone bank lists, local events and the ability to contact like-minded people or recruit new ones. Mybarackobama.com is also a sophisticated data network that allows the campaign to home in on detailed information such as whether a supporter is more concerned about civil liberties, foreign policy, education or energy policy."

The mybarackobama.com site is a full-scale social network, with a built-in business model: getting the Senator elected President. Tony Steidler-Dennison explains (podcast, 24:05) how social networking tools work as part of the campaign. The Obama campaign is saving money on conventional database marketing, the same way that campaigns and advocacy groups saved money on mass media when they discovered databases.

The power behind the "Reagan Revolution" of 1980 was Richard Viguerie, who borrowed database marketing techniques from the direct mail business. When Reagan appointed James G. Watt as Secretary of the Interior, the US environmental movement caught on to database marketing, too. Every word out of Watt's mouth was a money quote for a direct mail envelope, and environmental groups became direct mail machines.

Today, if you're running a political campaign or advocacy group, you're already blowing huge amounts of money on direct mail. If you're CIO of an advocacy group, online social networking is looking like a major bargain. Right now, the ACLU and Amnesty International use the web top-down. Even the online-focused EFF is behind the Obama campaign, which draws on ideas from the 2004 Dean and Clark campaigns and Facebook. Stern writes, "Chris Hughes, a 24-year-old Facebook co-founder, has been a fulltime Obama campaign worker for more than a year and helped develop the candidate's site."

All this is good news for the developers who are working on solving the social network portability problem. Advocacy groups often form shifting coalitions, and being able to draw on "social graph" data from other groups could be a potent webmaster weapon against the troll problem. And, if you're looking to make money from a for-profit social network, the advocacy groups could be in a position to undercut you.

Syndicated 2008-04-29 18:31:46 from dmarti's blog