The recent boom of social networking sites such as MySpace and Facebook have led to an obscene amount of discussion about where the future of sites like these lie. MySpace has been entrenched as the cream of the networking site crop, however sites like Facebook and Twitter are trying to take bites out of the pie.

The trend of the internet boom has been for upstart sites to gain popularity fast and then sell to established giants for millions. Companies such as Google and Yahoo routinely buy out fast-growing sites such as YouTube or they have launched competition for the growing medium of entertainment. With Rupert Murdoch securing the bid for MySpace and Mark Zuckerberg refusing to sell Facebook and the popularity of these sites growing, the giants have taken notice. They recognize the potential in selling ads and they system of selling advertisements through applications is an exploration of network effects in and of itself. The New York times article: http://bits.blogs.nytimes.com/2008/04/25/who-needs-another-social-network/#more-1092 looks at the saturation of the market for social-networking sites. The popularity of MySpace and Facebook raise a different issue than sites like YouTube because the allure lies in the social networks that are already there. There is essentially a cluster of such a high density in the current social-networking sites that other sites are unable to get enough new users to cause a cascade that would lead to a switch. The only way another site could break in is by provided better services, which is precisely what Google and Yahoo tried by creating their own networking sites. However, these have not gained widespread popularity, especially in the most prominent markets.

So how are Google and Yahoo going to dip into one of the fastest growing internet fads? They have decided to provide many of the same services to their users without changing the sites they visit. Google is intending to incorporate information about what videos, articles and social events their friends are interested in as well as allowing people to share photos, from their customized google home page. However, they are running into several problems. Trying to connect people is admirable as we have seen all year, the strength inherent in having many ties, be them strong or weak, but the companies have raised questions about privacy in broadcasting some of the information that they gather to other people.

All in all, it seems to be a fruitless endeavor to me. People are satisfied with the services provided by the current networking sites, so the payoffs to get people to switch must be very high. The best approach for sites like Google or Yahoo would be to target a specific, “sub-cluster”. Facebook broke into the market by specifying its site for college students and making it the best site for college students. This way, it could focus its resources and gain a niche before trying to expand and challenge MySpace. The less dense the cluster these sites focus on, the better their returns are going to be and the faster they are going to grow.