Rob Frankel posted an interesting analysis of the current buzz environment surrounding online social networking and, in general, "Web 2.0". In fact, Rob predicts the demise of social networking sites.
I agree with Rob that current practices in marketing and advertising do not support the current business models of these social networking sites.
So what if sites are able to collect large numbers of users who interact in these online communities? Just because lots of people do it doesn't mean there are profits to be found.
The name of the game is building brand loyalists for these online sites. Loyalists who gladly contribute an ongoing revenue stream.
Ad-supported revenue models just aren't going to cut it. Click-through rates for ads are abysmal online and only the most targeted of campaigns with the most closely aligned offerings stand any chance of success.
Add the over-hyping of social networking and Web 2.0 by overexuberant entrepreneurs trying to make money from these sites and it starts to look like the days of the dot-com bubble all over again. Lot's of promises and hyping but very little value creation that drives ongoing revenue generation from brand-loyal users.
What we're seeing now is also the exploitation of a new medium by less than fully honest and ethical marketers.
Online videos on YouTube, blogs, podcasts, social networking sites (remember when we called them forums and sig's?) are currently seen as new and cool. Everyone gets a shot at their 15 minutes of fame.
Some so-called marketers out there are exploiting this by making things "seem" user-generated while the reality is that budgets -- sometimes large ones -- are behind the promotion of these brands. There is much scamming and shilling going on.
Does anyone really believe that "social networking" only started recently because of advances in Internet technology? Does anyone realize that secretly paying others to blog about or create YouTube videos that support their brands is nothing more than deceptive advertising?
Consumers are becoming more and more sophisticated about all this user-generated media and social networking and starting to understand that not everything is as it seems.
Some marketing tactics are designed to go undetected. Some things are hyped just to try to get somebody else's money. Some will try new, stealth ways to monetize an otherwise unprofitable social phenomenon.
As more and more people begin to understand the new media dynamics, we won't have as many snake oil salesmen rolling through town in their horse-drawn carriages hawking Web 2.0 and Social Networking-For-Money with their duo core processors and three-card monte misdirection.
Deceptive exploitation practices will be exposed and the masses will be less trusting. Once the deceptive advertising and speculation is exposed and consumers become savvy, then most of these social networking sites will dry up and go away unless a real business model comes forward where there is real revenue flow. Revenue flow from social networking means users pay for access in mass numbers, and that simply isn't likely to happen on the web.
Speculation without real return is as bankable as fairy dust.
Copyright 2007, Dave Dolak. All rights reserved.
