What’s Next After Social Networking?

The Eras of the Web

Age #0 – eCommerce
E-commerce is the most primitive way of making money online. It’s identical to the real world, where you have some products (real or virtual) and you sell them to consumers and pocket the money. The only difference from the world we live in is that the “e” prefix eliminates some frictions and allows this process to get completed faster and easier each year. That’s why the first age of the Web was full of online sellers; companies got funded to sell and specialize in a variety of things. Some of them have become successful because what they sold was aaleable (e.g. Amazon with books), but others failed because their motivation was “everything can be sold over the internet” – which turned out to be wrong in some cases. Overall, e-commerce is still a very important component of the internet’s revenue stream – albeit not as mighty as we once thought it could be.

Age #1 – Single Sign-on
While everyone was building and investing in e-commerce sites, two Stanford students figured out a new way of making money online. Yahoo started out with a simple web directory, but their idea was to port traditional media business models to the online space. They weren’t focused on selling goods, but they brought great services together and glued them with a single sign-on mechanism. Consequently, they created some sort of vendor lock-in; because signing up has been the biggest friction that awaits web surfers. Remember the old tedious sign up processes – they even asked you how much money you make per year! And note that there was no such thing as OpenID at that time.

The motivation of Yahoo at that time was to keep the visitors as long as they could on their properties (actually not much has changed). After all, the longer users stay, the more ads they can view. This seemed like a perfect business model at first, because it allowed people to get great services for free. Everyone liked it and Yahoo became the poster child company of the late 90′s.

Age #1.5 – Geocities
While Yahoo was rising, a new service emerged and started to take the lead slowly – Geocities was one of many sites that provided free web hosting and web site creation services. However GeoCities was different in some ways. It was more like the social networking sites of today; the self expression level was high and the weird naming scheme based on city names gave it a human touch. That’s why we can call GeoCities the first utterly successful social interaction platform. However, after it was acquired by Yahoo it became yet another web hosting service provider – and it lost its soul and failed. No one can blame Yahoo for that though, because that was the first of its kind and at that time everyone was unaware of the social impact of such a big web acquisition.

Boom
The Boom period (aka Dot Com) is not an age like the others, but is worth looking into. The reason of the boom was the lack of calibration between the pace of internet applications and the internet infrastructure. VC firms invested heavily in web sites, with the dream of being the next Hotmail, eGroups, Viaweb – but the internet infrastructure didn’t scale well to the increasing production. People were not spending enough time on the internet and download speeds were slow – therefore the demand couldn’t satisfy the production. Moreover, there wasn’t any adequate monetization method of the content spread over the web. As a result, revenues fell short and the market crashed very badly.

Age #2 – Search
While Yahoo was trying to get people to spend as much time as possible on their properties in order to maximize their advertising revenues, 2 other Stanford students – this time Larry Page and Sergey Brin – came up with the idea of excelling at search. Because they realized that search was the start point of the web. Even though people were likely to spend time on Yahoo properties, they still needed long tail sites to get informed and reach other stuff that Yahoo couldn’t offer. What Google did was to offer a better search service with absolutely no clutter. Their sparse but highly efficient service opened the doors to big deals and hugely profitable online advertising. Eventually they became the center of the web. Now, Google’s new purpose is to bring desktop applications to the internet too.

Age #2.5 – On-demand Video
It’s a fact that humans are born lazy. Yes, we love spending time on the internet and interact with many things; but still many of us prefer spending our free time on TV and watching meaningless shows. What the new high speed internet infrastructure did was, in some sense, bring TV to the internet. And what YouTube and others did, was to bring it to us. Yes, Google was the center and we were still using it, but YouTube grew sharply too during this time. We started to spend more time watching videos than mining the internet for more information. That didn’t only steal time from Google and the long tail sites, but also stole from the traditional TV networks – because we prefered on-demand TV over the old linear one.

What happened then is Google saw the potential at YouTube and bought it. This cost $1.65 B (an amount that Yahoo couldn’t or wouldn’t risk). But actually the number was surprisingly low for a paradigm shifting company. Couldn’t YouTube become the new Google by itself, couldn’t they make an IPO and become a billion dollar company? The answer is unexpectedly “no”. The reason was YouTube’s legal hassles. They knew that they would confront legal problems sooner or later and that’s why they chose the quick exit and get under the wings of a well established company. Google could protect them and spend the required money to fight in courts. In fact, YouTube got sued almost immediately after the acquisition – Viacom wanted Google to pay $1 B for the illegal videos YouTube published. This was a big threat, that could’ve allowed other content producers to demand the same as well.

Age #3 – Social
Actually social interactions have always played an important role in the internet. GeoCities, Friendster, ICQ, IRC were all signs of the fact that social interactions can control the destiny of the web. But all of these products had problems and couldn’t make it to the end. For example acquisitions finished GeoCities and ICQ. Friendster had bad management problems. MySpace kept growing, but it couldn’t take the necessary steps to become a real big thing. IRC became obsolete with ICQ. Only one company figured out the way of putting social interactions to the center of the web and it was Facebook. Facebook, for the first time, opened the gate and merged all social services into itself. Now you can integrate your IM (meebo), Twitter, and other services into Facebook easily. Thus Facebook became a true platform company and is increasingly many peoples start page.

Bigcos had already realized that social networking sites would eventually become our start pages and that all of our internet actions will get reshaped there. On the likes of Facebook, our actions will be shaped by our friends and trusted communities. That’s why Google signed a billion dollar deal with News Corp to become the default search provider of MySpace. Their thought was that hopefully this would give them some time before they needed to reorganize themselves and make an attack in the social world as well. Yahoo tried to buy Facebook, as it didn’t have this Platform feature yet, but failed. They ended up by buying a niche site Rivals.com, to create their own Facebook and possibly try to explore opportunities with News Corp’s MySpace.

Age #4 – Joost ???
It’s hard to guess the 4th phase of the web because we don’t even have the 3rd one yet, fully. But what the past eras (see ages 1.5, 4 and 2.5) show is that we will end up with the rebirth of online TV. Since we are all born lazy, video on demand is the way to go. And what Joost is offering is higher quality content (thanks to their collaboration with big content providers), higher quality watching experience (thanks to P2P technology) and a legal hassle-free alternative to YouTube, which has already shown tremendous success.
Conclusion

This is an open ended article. You may not share the same ideas as me, especially about my Age #4 estimation, because it’s completely subjective. For example some of you may think that Second Life, meebo or NetVibes is the next next big thing. Please share your thoughts in the comments. I’m stopping here for the sake of keeping the article short(ish), but I am ready to discuss in the comments other possibilities.

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