Brad Howarth, the author of ZDNet Australia's news investigation into their long-term viability, argued they are yet to prove themselves to be more than a fad. He argues that there is little evidence companies playing in the area can generate sufficient revenues to be viable.
Your correspondent must admit he agrees. These tools, designed to help people to manage existing friends and business contacts while using referrals to find new ones, do have potential. In an ideal scenario for social networking vendors, mass take-up would give switched-on businesspeople the ability to make connections quickly and easily. People would be able to connect with people with like interests more quickly and easily than they can currently.
However, the capacity of these tools to generate revenue must remain in question. The ICT sector is particularly notorious for the rise and flame-out of fads being a regular occurrence. For the service to work on the revenue side, the services must create enough value for plenty of individuals to pay to access them and/or consistently attract a high-enough quality clientele to secure advertising dollars. As Howarth noted in an e-mail to us, social networking companies are asking people to alter the means by which they construct and maintain relationships and are yet to show that people will do so over time in a manner that will generate strong revenue for the service provider. "Many companies have gone broke chasing models based on online advertising revenue or in transitioning free services to paid ones.
"There are exceptions -- but these are exceptions, not the rule".
However, Howarth's article elicited a fiery response from one Scott Allen, who styles himself an author, speaker and consultant on building business relationships online.
In a lengthy response, available here, Allen claims that, instead of there being little evidence that companies in the area can survive and thrive, "it's simply too early to tell". He reckons social sites such as Friendster are only now "hitting the early mainstream part of the adoption curve," while business networking sites are still in the early adopter stage.
Howarth subsequently posted a reply to Allen, available here.
It's going to be interesting to see whether social networking services thrive, survive or die. What do you think? E-mail us at firstname.lastname@example.org and let us know.