Social networks: Great fun but no money

Posted Feb 5th 2008 9:57AM by Tom Taulli
Filed under: Google (GOOG), Marketing and Advertising, News Corp'B' (NWS)

It seems every day I get a pitch for a new-fangled social networking site. For example, I saw one that is for people who like food. Oh, and there was one for people who are over 70 (I'm not kidding).

Hey, with the huge success of MySpace and Facebook, I can see why entrepreneurs are jumping on the bandwagon. But are things getting out of control? And more importantly, is there really much money to crank out of social networks?

From what I can tell, it looks like the space has been a bust. For example, on the recent quarterly conference call for Google (NASDAQ: GOOG), there were some comments that indicated the disappointment with the monetization of social networks.

The Wall Street Journal [subscription required] has a piece on this today. What are the issues?

First, social networking is a fairly recent thing, so it's tough to get a handle on things.

Another issue is privacy. After all, people put lots of personal information on social networks. Might that information be misused? Interestingly enough, Facebook has had to deal with a few of these snafus.

Then there is the inherent branding problem. With user-generated content, there may be some nasty surprises. In other words, do you want to jeopardize your brand if there is risqué content?

But I think there's something else. While social networks are great for communications, do you really want to respond to ads when you are communicating? So far, it seems that people think "not so much."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Tags: Facebook, goog, google, inthenews, myspace, Social networking, SocialNetworking