Social Networking 3.0

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Second Coming

Psychologist Stanley Milgram established in the 1960s that any two people on earth are connected to each other by a series of, on average, six intermediaries -- an idea that was later popularized through John Guare's play "Six Degrees of Separation" and the subsequent film adaptation. By the late 1990s, entrepreneurs realized that the Internet could become the perfect medium for connecting people to others beyond their first- or second-degree acquaintances.

But the first generation of free social-networking websites, such as sixdegrees.com, dried up even before the dot-com boom ended. That was partly because, like most other dot-coms, the sites lacked revenue-producing business models. But it was also because the technology hadn't evolved into a usable form. Users had little idea what they could actually accomplish through their online social networks.

The post-crash boom in online advertising -- and especially the 2001 advent of Google's AdWords advertising program, which shows keyword-based ads alongside content such as users' profiles -- finally gave social-networking companies a way to convert website traffic into dollars, without having to take the perilous step of charging members a subscription fee. As many as 30 social-networking startups were launched between 2001 and 2004, backed by tens of millions of dollars in venture capital. (See "Internetworking," April 2004.)

But sites like LinkedIn, Friendster, and Tribe still offered little more than the ability to create online profiles and invite friends to link to those profiles. Members raced to see how many connections they could build, as if the size of one's network were more important than the quality of its members.

By late 2004 or early 2005, the novelty had begun to wear off for some. "When [LinkedIn] was first created, I thought it was interesting and thought it'd be beneficial to have my information there, both for me to contact people and for them to contact me," wrote Russell Beattie, a software developer at Yahoo, in an April 2005 blog entry. "I gave it plenty of time to be useful, but it just hasn't done anything at all for my life."

At that very moment, however, LinkedIn and other companies were beginnning to add features that made the value of an online social network clearer, at least for some users. In March, for example, LinkedIn launched a feature that helps job seekers find contacts at companies where they want to work; LinkedIn makes money by charging $10 for each message a user wants to send to a potential employer through the network. Other new revenue-generating features include a job-posting service and LinkedIn for Groups, which creates online networks confined to organizations such as college alumni associations.

Friendster, for its part, boasted by far the largest social network online by 2004, with over ten million users. Then the company endured a painful user backlash over poor site performance and a plague of hoax profiles called "fakesters." But now Friendster is staging a comeback, in part by introducing a raft of services that help members trade digital content.

"We've listened to our user base very closely, and we're also paying attention to what the competition is doing, and we've formulated a new strategy that is really about personal media," says Jeff Roberto, a marketing manager at Friendster. For example, users can now create blogs, control the appearance of their profiles, upload up to 50 photos, watch slide shows of the photos most recently uploaded by their friends, post classified ads that link back to their profiles, and share audio and video files stored on their PCs using peer-to-peer technology provided by Grouper.