Lets Party Like Its 2005

"Social" has become a popular prefix lately. And for good reason. It seems to have a positive impact on valuation multiples. Social media, social networking, social mashups. There is no doubt that Newscorp's acquisition of Myspace last year, combined with the hard evidence of gigantic consumer traffic shifts to social media platforms - is a powerful siren song to would be entrepreneurial activity.

The thorny issue of commercialisation remains. Brand advertisers are still cautious about executing large scale campaigns in unpredictable user generated content environments. There is also some technical issues with tagging relevant advertising to content (let alone working out whether or not the user is actually writing a positive report, or a damning flame about your product).

One of the potential solutions to advertising focus and also the 'too big' effect of a broadly focused social network is verticalisation. Nike and Google have teamed up recently to create an invite only social media site called Joga around Soccer.

The other commercialisation option is to figure out how to integrate subscription revenues. Linkedin have recently started to experiment with a premium option, which allows for greater connectivity. Interestingly, social networks may be more value destroying than creating when it comes to the usual web subscription models. Why pay $20 a month for a dating site, when you can get the same effect (without the stigma) for free on Myspace.

You can bet there will be more plays in this space to follow. But as always the Groucho Marx paradox applies. Who wants to join a club that is trying to get you as a member?

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