April 2004

Internetworking

New social-networking startups aim to mine digital connections to help people find jobs and close deals.

By Michael Fitzgerald

It's a grim January day here in Oakland, CA, but Justin Phelps is grinning so wide it practically shows through the phone. "It's about 80 degrees, blue skies, there's a couple of cruise ships in the water," he says. "It's perfect."

Phelps is in Grenada, but he's not on vacation. He's the new chief technology officer at Blue-Stream, a Caribbean telecom and Internet provider, and he's describing the world outside his office window. Not long ago, the 28-year-old was about to become yet another unemployed Bay Area dot-com casualty and was packing up for a six-month trek in South America. But then he logged into Tribe.net-an online social network where he'd set up a profile of himself and his interests and built a network of connections. A friend on Tribe had sent him word of the Blue-Stream job after hearing about it from another Tribe member he knew from the site's yoga interest group, which happened to include yet another member who knew a Blue-Stream director.

That's a lot of connections to follow, and Phelps's experience may be extreme; in fact, Tribe.net features his testimonial on the front page of its Web site and has directed several journalists his way. But it demonstrates what can happen when people's real-world social networks are enhanced by computer-mediated ones. Software like Tribe's helps users create, map, and exploit a web of social and professional acquaintances much broader than the ones they maintain in everyday life. And those webs are good for more than just finding jobs: businesses are starting to use them to dig up sales leads and close deals.

The premise behind this new social-networking technology is simple: you may know a lot of people from work, college, church, or your neighborhood, but you probably don't know exactly who their friends are-and forget about their friends' friends. But join an online social network and invite a few acquaintances, and the software will begin to reveal previously hidden second- or third-degree connections that can lead to an interview, business meeting, or tee time with that elusive potential client or employer.

With venture capital firms lining up to invest, and more than a million subscribers already signed up, automated social-network analysis has become one of the hottest trends to hit information technology since the dot-com bubble. That's despite the fact that when the bubble burst, it took with it an earlier wave of social-networking-software companies, destroying millions in equity. Those first-generation companies, such as sixdegrees, PlanetAll, and BranchOut, had good ideas but bad timing, the new innovators and their backers believe. While the companies proved that people were interested in easier ways of connecting, whether for a job search or just to hang out, it was also clear that users had to work too hard to build those networks; for example, many users had to manually upload contact information from their paper Rolodexes or address books.

Today, "Eighty to ninety percent of [real-world] social networks have a digital component," be it an archive of e-mail correspondence or vital statistics logged into a sales force database, says Antony Brydon, president and cofounder of Visible Path, a New York firm that's developing social-networking applications for corporations. These digital trails mean that human connections can be plumbed, downloaded, and mapped automatically-so companies like Visible Path can help clients take better advantage of their employees' business relationships.

By some counts, more than 30 social-networking startups have been launched in the last three years, backed by tens of millions of dollars in venture investments, and their services go well beyond those of the now familiar dating sites like Friendster. Visible Path has raised $3.7 million in venture capital, with investors including technology industry seer Esther Dyson and several high-tech executives. Rival social-networking firm Spoke Software, meanwhile, says it has collected a tidy $20.9 million.

This second wave of networking companies could still crash, especially if they can't entice people or businesses to pay for their services over the long haul. But technologists and investors are adamant in their belief that things are different this time-and not just because more people have their contacts stored electronically. It's also because the new companies are being more cautious with their cash, and because consumers are more wired now than they were five years ago. If nothing else, there is a strong sense that software that maps social networks is so useful that other, larger software and Web companies will eventually add it to their own offerings. Social networks, like multimedia, will simply become a part of the online experience, says Marc Canter, founder of multimedia-software giant Macromedia and now head of Broadband Mechanics, another San Francisco social-networks developer. "It's going to be a feature, and everybody will have it."