If there were a competition for “Internet Buzzword of the Year,” last year’s winner would have been “social networking,” as a cohort of companies such as Ryze, Tribe, LinkedIn, Friendster, Spoke, and Visible Path, rolled out new or improved services that let Web users create online mirrors of their circle of real-life acquaintances. The idea was mainly to let users build online profiles that advertised their interests and to help them connect with friends and friends-of-friends around one of those interests – whether it be finding a job, making a sale, or repairing an old motorcycle.

But with the exception of Friendster and Myspace, the initial response to these services among average Internet users was sluggish. Many users signed up for one or more services, created online profiles, formed connections with a few acquaintances, and drifted away, uncertain about how to use the networks.

But today, not only have all of these companies survived; they’re experiencing record growth, introducing new technology and new money-making features, and being joined by sophisticated new competitors such as iMeem. Moreover, they’re joining the parade of sites offering “rich media” – the big buzzword of 2005 – by encouraging users to share their own content online, including photos, videos, music, and other digital files.

Social networking, in other words, is finally becoming a real business with a convincing product.

“A year ago a lot of our users were pretty unclear about what they could do,” says Konstantin Guericke, co-founder and vice president of marketing at LinkedIn, a social network focusing on business connections. “They knew they were getting invitations to join the network, and they knew how to accept invitations, and sometimes they sent their own invitations – but they weren’t sure what else to do with that.”

A year later, LinkedIn’s membership has grown from 1 million to 4.2 million; users are conducting 5 million searches a month for potential contacts within their own networks, and the company has launched several revenue-producing features, such as paid subscription options that allow members to search profiles outside their immediate circle of friends and friends-of-friends.

Rather than simply passing requests for introductions back and forth through their networks – which was about all they could do a year ago – LinkedIn members are using their networks for practical purposes, like finding job candidates, locating business and legal services, and coordinating group activities.

What makes all this possible, says Guericke, is the user-generated content LinkedIn holds in its members’ profiles, such as resumes and testimonials. “First, we are a search engine. But second, we are a publishing platform – about yourself and what other people say about you,” Guericke says. “It just creates a more powerful business.”

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.

“The uptake we’ve seen has been incredible,” Friendster CEO Taek Kwon said in October, about a month after the new features were introduced. “We’ve seen substantial increases in media being uploaded, profiles being customized, and people posting classifieds.”

Friendster’s current membership: 21 million, with 9 million of those users returning to the site every month.

Friends or Buddies?

The newest players in social networking, such as Palo Alto, CA-based iMeem, may have a long way to go to catch up with the likes of Friendster – but their technology is already leapfrogging that of their older competitors.

iMeem hopes to attract members by building all their activities not around a virtual representation of their social network, but around instant messaging technology. Indeed, the company’s name is a combination of IM, for instant messaging, and “meme,” meaning an idea spreading through a network.

As an undergraduate in psychology at Stanford University, iMeem co-founder and CEO Dalton Caldwell wrote a thesis about instant messaging’s role in workplace collaboration. The wave of social networking applications that emerged around 2001 intrigued him, he says, but “from the first time I saw this stuff, I didn’t think it was interactive enough. It was too much just lurking and watching people from afar, but not in real time. It seemed to me the center of the universe [in a social network] should be a buddy list rather than a friends list.”

That’s exactly how iMeem works. A downloadable application similar to Yahoo Instant Messenger or MSN Messenger, iMeem is built around a buddy-list window that shows a user which of her friends are online. From that window, she can send and receive instant messages, join group chats, keep a blog, and share photos, videos, podcasts, playlists, and the like with other users using a peer-to-peer system related to the technology behind the original Napster.

Aggregating all of these functions into one program sounds like a recipe for information overload. But Caldwell believes that iMeem users will act as each others’ media critics, perhaps bringing real effectiveness to the much-heralded idea of “collaborative filtering.” “There’s too much stuff out there,” Caldwell says. “Too much data, too much content, too many blogs. Collaborative filtering is one of the most important things that’s happened on the Web over the past couple of years. It’s holding back the tide of overstimulation.”

It could be argued, of course, that supplementing one’s everyday, real-life interactions with virtual ones through social-networking sites simply adds to the overstimulation. But if users weren’t gaining some benefit from their online networks, they wouldn’t be signing up by the millions. In the future, membership in an online social network may seem as commonplace as belonging to a more traditional organization like the Boy Scouts, the PTA, or the local Neighborhood Watch. The only difference? By ponying up a subscription fee or enduring online ads, you’ll be paying for the pleasure.