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Social Networks Revisited

At DEMO and in the weeks since, I've been asked many times why the conference didn't offer a focus on social networking. There is, of course, one very practical reason: No compelling new services were coming to market in the DEMO 2004 timeframe. But that's the easy out.

As I've written before, social networking eludes a business model that makes fundamental sense. Without a clear avenue to revenue that returns value to customers and dividends to shareholders, social networking runs the risk of being just another business bubble. To date, I've only seen one company - Spoke Software - that has a clear path to revenue. While its public network is a proving ground for the technology, Spoke will pay its bills by providing to enterprise customers the platform and engine to run proprietary business networks.

But even as I puzzle over the business value of social networking companies, I do recognize that social networking systems can be highly useful. Indeed, since I first wrote about LinkedIn on January 20, 2004, my opinion of the service has evolved. (See ).

Then, I thought that these networks were little more than popularity polls - who was most connected and to whom. In recent weeks, however, something has changed. The network (in this case, via LinkedIn) has become more useful. Perhaps my personal network - now with some 200 direct connections and a total reach of more than 178,000 people - has finally reached some critical mass. Perhaps network members have had a collective epiphany that has revealed that the value of such a network is more than membership. The value is in actively working the network to your business benefit. Whatever the reason, I now feel that I am part of an ecosystem of business contacts that, when properly respected and leveraged, can deliver value to me and to the members of my immediate network.

In the last week alone, I've been asked to make job referrals (both by seekers and hiring managers), I've connected with long- lost colleagues, I've linked businesses interested in doing business together. I've also refused to make an introduction because I knew no good value would come from it. And I know that as I begin work on a new project, I will turn to LinkedIn to find the connections I need. In short, LinkedIn is proving its value to me.
Still, that business model question looms. To date, none of these social networking services has asked me to pay a subscription fee (the most palatable of the possible options). With some 250,000 plus people (the number of users LinkedIn reports) paying a small recurring fee, there might be a nice little business there, but hardly enough to warrant the venture investments these services are attracting.

Some have talked up a pay-for-introduction model, where the service gets a commission each time a successful connection is made. This model troubles me for two reasons: First, it is very easy to go "off network" to make an introduction - thereby cutting the service out of the value chain. Second - and most critically - I'm not excited about someone else making money from my network and my efforts to connect network members.

And now, as I continue to watch and ponder the business behind these services, comes Orkut, the Google-backed social network. Google has proven itself extremely smart in extracting dollars where market critics said there were none, so don't rule Orkut out as a latecomer to the social networking party. Yet, I can't help but feel that Orkut is a BYOB (bring your own business) affair and I've somehow brought the wrong cocktail mix. One thing is clear: Social networking is more than a fad, if not yet a business. I'm very interested in what you have to say on the topic. Drop me a note at

Chris Shipley is the executive producer of NetworkWorld's DEMO Conferences, Editor of DEMOletter and a technology industry analyst for nearly 20 years. She can be reached at Shipley, has covered the personal technology business since 1984 and is regarded as one of the top analysts covering the technology industry today. Shipley has worked as a writer and editor for variety of technology consumer magazines, including PC Week, PC Magazine, PC/Computing, and InfoWorld, US Magazine and Working Woman. She has written two books on communications and Internet technology, has won numerous awards for journalistic excellence, and was named the #1 newsletter editor by Marketing Computers for two years in a row. To subscribe to DEMOletter please visit:

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