What is social networking's value add?

Summary:The bottom line here is that Wall Street is valuing too many Internet companies as though they were manufacturers, with rivals facing an immense hurdle before they can compete. In fact they're more like clothing retailers. Or even clothing designers.

Fashion 2007 from iVillage.Com
One of my great frustrations with Wall Street reporters is they tend to treat tech companies like car outfits. (Picture from iVillage.Com, identified as Scarlett Johannson's favored leopard jacquard, whatever that is.)

That is, they see small market advantages like traffic and unpaid memberships as immense financial events, then apply the rule of consolidation (every market consolidates) to pretend these leads are unassailable.

They did it with Yahoo, which was overtaken by Google. So they did it with Google, especially after Google bought Blogger. They did it with MySpace, which was then passed by Facebook. Now they're at it with Facebook.

Microsoft's $240 million purchase of 1% of Facebook means otherwise-smart people are buying this hype. Has anyone yet noticed the growing competition faced by YouTube?

The news peg here is word that you can use open source tools to create your own version of Facebook. Creating an open source architecture for it is not terribly difficult.

Everything depends on execution, as they say. Mark Mullenweg has grown up and beaten Google at its own game, with WordPress. Would it be that hard for him, or someone like him, to develop a social networking site?

The bottom line here is that Wall Street is valuing too many Internet companies as though they were manufacturers, with rivals facing an immense hurdle before they can compete. In fact they're more like clothing retailers. Or even clothing designers.

Thanks to open source what looks like an immense business advantage may just be fashion.

Topics: Collaboration, Google, Microsoft, Networking, Open Source, Social Enterprise

About

Dana Blankenhorn has been a business journalist since 1978, and has covered technology since 1982. He launched the Interactive Age Daily, the first daily coverage of the Internet to launch with a magazine, in September 1994.

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