Social Networking: Is There a Business Model?

Check Courante for a blow-by-blow report of this week's symposium at Stanford B-School on Social Networking: Is There a Business Model?.

Ross Mayfield on Social Software:

Our business model is antithetical to traditional enterprise software. Top-down software, with lines of code as barriers to entry, process and ontology that users are expected to fit themselves into, long sales-cycles and inordinate TCO -- is by all accounts dead and leaves users stranded with email.

The reason for this is the rules and opportunties have changed. You can't screw your customers. You can't lock them in. You can't ask them to take significant risk up front. Risk is shared with customers by providing incremental proof of value in-line with them taking risk on you.

While startup costs have declined, some have increased. Notably, its harder to sell traditionally (top-down) and you can't raise barriers to entry by locking-in your customers. The only entry point is bottom-up. The only marketable barrier to entry today is network effects.

Another viewpoint rings true:

We will see social networking functionality become become an integrated service provided in an application suite. Just like Microsoft Outlook and Yahoo have email, calendars, and address books, it wouldn't be a stretch to extend their services to support social networking functionality. They already have the captive audience and branding so adding social networking functionality isn't really a high barrier to entry for them. We should all stay tuned for a lot of interesting M&A activity in this space, rather than the next big thing.

Bottom line on the starting question: No, there's not currently a business model.

Posted by Jay Cross at September 19, 2003 11:34 PM | TrackBack

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