Social networking faces an uncertain future

Social networking faces an uncertain future

Summary: Analysts have compared the popularity of social-networking sites such as Facebook to the dot-com boom, and warn that long-term growth is by no means assured

TOPICS: Networking

Social-networking sites will enlist 230 million active members by the end of the year and will keep attracting new users until at least 2009, according to an analyst report. But investors are still wary — and for good reason, as long-term growth is by no means certain.

The Datamonitor report — The future of social networking: Understanding market strategic and technological developments — predicts that growth in the number of people signing up to be a part of the cultural phenomenon, which has put the likes of Facebook on the map, will peak by 2009 and plateau by 2012.

It also suggests revenues from social-networking services will hit $965m this year, swelling to $2.4bn by 2012.

Growth in the membership of social-networking sites varies dramatically by region, according to the analyst, which predicts Asia Pacific will account for 35 per cent of global social networking users by the end of this year, followed by EMEA (28 per cent), North America (25 per cent), and the Caribbean and Latin America (12 per cent).

However, while Datamonitor likens the current hype and excitement around social networking to the heady days of the dot-com boom, it said there is anxiety as well, and warns that investors are pulled in two directions. They do not want to miss out on the "next Google or Yahoo" but are cautious of being overconfident about a web phenomenon that is not proven over the long term.

It is for this reason that most social-networking sites would be wise to postpone an IPO, said the analyst.

Speaking at a Web 2.0 conference in the US recently, Mark Zuckerberg, this year's top Agenda Setter and founder and chief executive of Facebook — very much the social network of the moment — said his company is "years" away from any such flotation.

Ri Pierce-Grove Technology, analyst at Datamonitor and author of the report, said in a statement: "The extraordinary proliferation of online social networks is fuelled by real innovation and is substantially changing the way we communicate. However, the hothouse atmosphere of easy capital, media attention and user curiosity which stimulates creativity will not be sustained indefinitely."

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The analyst added that players must develop a "two-pronged strategy in order to survive the extremes of heat and eventual chill which this market will undergo".

Datamonitor said the current growth in social networking offers opportunities for businesses to get involved in supporting the infrastructure needed to run such sites, and it advises technology providers to look for ways to support social-networking services in the areas of scalability and availability.

The analyst also takes the view that consolidation in the marketplace is likely as it becomes more crowded, but said this does not necessarily mean individual sites will be swallowed up. For instance, it predicts special interest social-network sites will continue to play a role.

Topic: Networking

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  • Round up the Social Networks

    I think a distinction between social networking sites should be made when it comes to identifing whats going to burst and what will stuck around.

    There are 3 types of site that spring to my mind and each of them has good/bad elements.

    These types are:
    1 Impersonal
    2 Personal
    3 Hobbies

    For example MySpace tend to lean towards the Impersonal, with friends being your circle of real life friends, then bands, then film stars, and finally random friend invites.

    Facebook on the other hand limits user interaction until your approve a friend, this sole feature means, no random spam from strangers and alot less random friend invites. >> yet more ninja/pirate/werewolf invites :(

    Sites like Last.Fm & Google Calendar where users can sign up to events and see what other members are planning on going, this is driven by hobbies, where people join up to converse on a favourite topic.

    The longevity of these site depends on the user base, I can/have seen a large migration of people to Facebook. Using FB on a daily basis while only using MySpace to keep tabs on band/tour news.

    While editing a user profile was fun at first, having to witness twenty or so 1997 Geocities pages when viewing friends profiles have become boring. (Quickly add more animated gifs!).
    Facebook with a standard format makes it easier on the eyes for starters.

    I believe keeping in touch with friends will outlast keeping in touch with complete strangers.

    A hobby driven websites lifespan will vary depending on the number of people that are interested in that subject, to drive forward the