Recently, I wrote that social networks were double-edged swords for media companies… they can be assets, or liabilities. While I’ve generally been quite positive about the strategic implications of media companies owning a social network, indulge me for a moment as I now go in the opposite direction by painting a potential “nightmare” scenario.
Last weekend, Mark Pincus laid out some interesting thoughts on the future direction of social networks. Although Mark didn’t explicitly say it this way, Hollywood needs to move away from the notion that all P2P is evil. I interpreted his vision as stating that the next generation of social networking was essentially going to adopt key architectural components of what many would recognize as a P2P network. We also all found out last week that AOL is about to upgrade its instant messaging platform, AIM, with social networking capabilities into what many are calling a “MySpace killer”.
The combination, or convergence, of IM and social networking is a very interesting proposition. Thus far, the main functionality of IM has revolved around “presence” (e.g. knowing when someone on your buddy list is online) and on real-time communications. Then there’s social networking, which has enabled people to express themselves within a community of friends and like-minded individuals. It’s a logical marriage and one that’s bound to yield high utility for its users. However, there’s a third consequence that’s likely to present itself, and this one, I’m willing to bet, is unintended.
Most IM services are essentially P2P systems… not too dissimilar from the technologies behind Napster and KaZaA. In fact, most IM platforms allow file-sharing (albeit limited to your “buddy list”). And because those files do not go through a central server, they are essentially Darknets… under the radar of outside observers. But so far, the emphasis on the real-time, text-based communicative nature of IM has limited the damage that these networks could have on media companies (e.g. owners and aggregators of copyright). Now, however, if IM platforms morph into social networks, it’s quite possible the transition will unexpectedly unleash the next tidal wave of massive file-sharing.
Taking Mark’s lead, let’s assume that a key difference between today’s social networks and those of the next generation will be the location of your profile. In other words, your profile will reside on your computer and not on a central host like MySpace. Now, let’s take this a step further by adding a P2P “share” folder to the profile. Hmmm… interesting…
As we all know by now, social networking is all about self-expression. And for most, showing the world which music and videos you like is a big part of demonstrating who you are as an individual. In fact, social networks are proving to be a highly useful resource for the discovery and recommendation of all sorts of art forms and cultural products. But instead of simply declaring what you like, social networks turbo-charged with P2P capabilities will allow users to actually share. Compound this with the fact that social networks overlap… what I call the “Venns effect” (as in Venn diagrams)… and any one person can effectively have access to thousands or even millions of other connected “friends” beyond their immediate social circle. So if all of a sudden, one-click file-sharing is added to this equation, it doesn’t take a rocket scientist to figure out what will probably happen next. I’d even be comfortable predicting that such a P2P-based social networking service could quite easily trump MySpace as the next “must-have” for teens.
If this “nightmare” scenario is indeed the likely direction of social networks, what should media companies do? The obvious answer is to bring out the high-powered legal eagles, as they have done with all previous generations of P2P networks (I hope Fred von Lohmann provides some insight and wisdom here by commenting). But what if they didn’t, and instead decided to embrace such people-powered distribution. After all, Hollywood tried to outlaw the last innovation in people-powered distribution, called the VCR… it was lucky that they actually did not succeed, because home video entertainment now accounts for the vast majority of their total revenues. But before Hollywood can be open to accepting what is likely to be the future of media distribution, it needs to move away from the notion that all P2P is evil. Rather, the media players need to understand that P2P that’s embedded into social networks is a very different animal than previous generations of P2P, and the issues surrounding piracy are far less insidious and much more manageable. There’s still the issue of control over distribution, of course (they’ll have to let go), but the opportunities to monetize are substantial, as are the prospects for materially lowering marketing and distribution costs. At the end of the day, the most important factor that will ultimately influence the final outcome rests on the media companies themselves, and whether they try to fight it or co-opt it to their benefit. While there’s much more to explain and say on this topic, I’ve run out of time and room, so the rest will have to wait for a future post.