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Social Networking Services are prompting large scale investments by individuals and organizations.

Example Business Models for Social Networking Sites:


Social Networking Entrepreneurs:

History of Social Networks

Social networking has come a long way since its inception through a website called SixDegrees.com that was launched in 1997. Users of this website could create profiles, list their friends and one year later, they could surf through their Friend list. The other forms of social networking during the time were the dating and community sites. AIM and ICQ also supported Friends lists but profiles were not viewable at the time. Around the same time, Classmates.com was formed allowing members to reach their high school and college friends and surf the networks of others who were also affiliated. However, users could still not create profiles until years later. SixDegrees turned out to be the first website that successfully combined all these features. However, this website did not last long because it was ahead of its time.

Those who were members of the website could not do much after they created their profile because of the lack of online in presence around the world during that period. Most users would meet strangers and this did not create much excitement. The years 1997 - 2001 saw the creation of a number of social networking, dating and community based website and people could now begin to make some connections online. The next wave of social networking sites began with Ryze.com in 2001, a site for building business networks. The people behind Ryze, Tribe.net, LinkedIn, and Friendster were tightly entwined personally and professionally. They believed that they could support each other without competing. In the end, Ryze never acquired mass popularity, Tribe.net grew to attract a passionate niche user base, LinkedIn became a powerful business service, and Friendster became the most significant, if only as "one of the biggest disappointments in Internet history". However, Friendster played an important role in opening the world's eyes and acceptance for social networking and paved the path for Facebook, MySpace, Orkut and other similar social networking biggies.

After 2003, social networking sites began targeting both mass audiences as well as more specific demographics. For example, LinkedIn targeted business professionals wishing to expand their connections with other business professionals. Also, MyChurch brought together members of the Christian faith while Flickr, YouTube and Last.FM brought together users that wanted to share various digital media.

One of the most popular social networking sites, MySpace, was formed in 2003. MySpace gained rapid success largely because it offered free services, whereas Friendster was beginning to charge fees to its users. One of the first groups of people that began joining MySpace were Indie-rock groups located near Los Angeles. The interaction on MySpace between fans and the musicians was one of the many things that propelled MySpace to success. MySpace also changed the website based on user demand, and allowed users to customize their personal pages.

In 2004, MySpace began allowing teenagers to sign up and create their own accounts. Members of this younger social crowd began inviting their friends to use the service, and soon MySpace changed their policy and allowed minors to join the site.

In 2005, MySpace was purchased by News Corporation for $580 million. Because of the wide variety of age groups on the site, MySpace became involved in legal battles due to the sexual interaction between adults and minors on the website. <ref>http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html</ref>

Business-Oriented Social Networking

Entrepreneurship and Venture Capitalism

There was much skepticism with the initial idea that business ventures centered around social networking were capable of being successful in the long-term. The low cost of entry into the market, combined with little to no switching barriers for users, gave business experts and investors little confidence in the robustness and the viability of social networking.<ref>http://www.businessweek.com/technology/content/apr2006/tc20060419_514268.htm</ref>

As of recent, however, social networking-based business ventures have been at the forefront of digital entrepreneurship. Websites such as Facebook and MySpace have proven, to some extent, on the feasibility of social networks as a successful business model. As a direct result, venture capitalists and advertisers<ref>http://www.pronetadvertising.com/articles/social-network-ad-spending-and-return-on-investment21122.html</ref> are increasing their attention towards social networks and investing significant amount of capital in these business opportunities.

Notable Venture Capatalist in Social Networking<ref>http://www.techcrunch.com/2005/10/19/top-five-web-20-venture-capitalists/</ref>

David Cowan- A Partner at Bessemer Venture Patners. Incubator of "Flock"

Tim Draper- Early investor in Skype

David Hornik- A Partner at August Capital. Has investments in Technorati and SixApart

Josh Kopleman- Of FirstRoundCapital now and was the founder of Half.com which was sold to Ebay in 1998. Has investments in Feedster, Linkedin, Del.icio.us.

Fred Wilson- One of the founders of Union Square Ventures and the lead investor in Del.icio.us.

See Also

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Digital Entrepreneurship

Social Network Service

List of social networking websites

Computer-supported collaboration

References