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Tuesday, Oct 7, 2008
Marc Pincus, the CEO and founder of Tribe.net, waves apologetically at the dog following him into his office.
"I know, I know, it's a start-up cliché to have a dog in the office," he says.
I can only nod my head. I'm suffering an extreme dot-com flashback.
About 25 or 30 employees are quietly hunched over laptops, sitting at desks built out of sawhorses and planks. There is no receptionist, but a Koosh-ball net hangs from a file cabinet. On giant whiteboards lining one entire wall, buzzwords sprawl -- words like "community" and "personalization" and "persistent identity." Words that once blasted forth from every start-up minaret in Silicon Valley. It's as if the bust never happened.
Marc Canter has a theory that the software innovations involved in social networking software, along with a host of other advances in what is called, more generally, "social software," are directly attributable to the dot-com bust. All those brilliant but laid-off programmers were sitting around at home with nothing to do. So they started hacking.
"We had an amazing phenomenon happen the last three years," says Canter. "Some of the best and smartest people all got laid off, and they were forced to sit at home and come up with shit on their own. [And they decided] that 'social networking' and 'social software' will be part of the infrastructure."
It's a kind of twist on the old "creative destruction" meme. Out of the demolition of the dot-com economy, the next stage of Internet evolution was born! By the spring of 2004, the excitement over social networking software wasn't just confined to the geeks and the millions of people trolling Friendster for dates. It had spread to the business community. The venture capitalists were coming out of hibernation.
"We've been getting calls every day, bottles of wine sent to our office...," James Currier, the CEO of Tickle, told me, just a few weeks before his company was gobbled up by Monster.com.
Software companies that had been doing business for as long as 10 years were suddenly reinventing themselves as "social networking companies." Kleiner Perkins invested in Friendster and Knight Ridder bought into Tribe.net. The dark ages were coming to an end; the renaissance lurked, just around that next IPO.
Locked in a symbiotic embrace, the naysayers were back in force as well. Because what was social networking if not another play on the same old "community" trope? Friendster, Orkut, MySpace, Tribe.net -- they were all free. Where was the business model? Why would anyone pay for these services? So what if 200,000 new users were joining Friendster every week -- how many hundreds of thousands had already abandoned their Friendster accounts for some brighter, shinier gathering place?
The typical pattern of user behavior for any of these services, says Clay Shirky, can be compared to the shape of a comet: furiously hot and active and swirling at the beginning, and then gradually trailing off into the chill nothingness of dead outer space.
You know you've got a problem when even as energetic an advocate of social networking as Canter acknowledges that "everybody signs up, it's really fun, and then you've got all your friends there, and you're all dressed up and there is nothing to do."
Was social networking just the latest addition to the emperor's wardrobe? As spring moved toward summer, the bloggerati who documented every new iteration were getting bored almost as quickly as they had become excited. Very early on, they had coined an acronym that oozed with jaded disdain: YASNS, for "yet another social networking service."
Pincus struck me as ideal person to press on the issue of business models. Tribe.net had some interesting innovations, but it did not appear to be experiencing the rapid growth of a Friendster or an Orkut. So how was it going to succeed in generating revenue? More importantly, Pincus has been through this all before. He's a serial entrepreneur, a veteran who was right in the middle of one of the biggest early waves of Internet hype.
Remember "push media"? Pincus founded Freeloader, one of the earliest of the push clients -- a program that would download Web sites for you while you weren't at your computer. Pincus and his co-partner managed to do quite well out of Freeloader, selling it to another company and cashing out, while the technology itself went nowhere. Not long after, "push media" became an Internet laughingstock.
Pincus nodded sagely when I asked him what made social networking different from push media. But it was difficult to tell whether he was conceding that the question was valid, or had already been asked the question too many times. And then he executed a classic side step.
"The business you're in is not social networking," says Pincus. "You need to apply that innovation and the consumer interest in it to something that's a real business ... Social networking is something that we found along the way and it was a means to an end."
Tickle's Currier could have been reading from the same playbook when I talked to him a few weeks later. "The excitement around social networking is not about social networking ... [The term] is a proxy for the excitement, for the re-excitement, about how Internet technology is changing consumers' lives."
And then Currier made a simple point: The Internet, he said, gets only 2 percent of the total national ad budget, but it already swallows up 16 percent of media viewing time. And after a few bad years set off by the dot-com bust, Internet ad sales were already growing again, quickly, with lots of obvious room to expand.
So why worry so much about whether there is a revenue model in "social networking"? After the bust, while dot-com naysayers were so busy congratulating themselves on their prescience, millions of people continued to spend more and more time online. It's not that complicated. The classic revenue model for media services has been in aggregating eyeballs for advertisers. With all those millions of people flocking to sites that, one way or another, offer social networking, somebody will figure out how to turn a profit. It may not be Tribe, it may not be Tickle, it may not even be Friendster that ends up keeping millions of people hanging around. But someone surely will.
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