In nearly every one of the talks I have given over the last few months, my corporate clients will inevitably ask me about what my prediction of the future of social media will be. I expect they want to hear about how social media will take over the world and all their customers will be plugged into the social media world. I have had a lot of time to think about this matter and have seen how the social media landscape has changed over the last few years. So here is my take….no punches pulled:
– There is no money to be made in social media inspite of what so-called gurus talk about potential business models for Twitter or Facebook. By money I mean profit after expenses. The growth of Twitter and Facebook mean that they are always adding new machines and technology to keep up with their every growing but never paying customers. Sure they make “some” money in different ways, but the truth is, the equation: Cost > Income will lead to a situation where someone needs to pick up the tab for the balance.
– The reason why no one wants to pay is because the value of the social connection isn’t high enough to justify forking money over. Seriously, how many people out there (excluding companies) would want to pay for their Facebook account? Even if they did, if most of their connections gave up their accounts they would soon give theirs up too. Twitter is even worse…how much will you pay to receive bite sized spam?
– Are there any other ways in which these sites can make money? Sure, but none of them have figured it out yet. As a consultant, I often tell clients to focus on the “social” aspect of social media…..that doesn’t mean folks at Facebook, MySpace, Twitter, etc….do too….. One of the reasons why Google was so successful was because they had the technology to keep their expenses extremely low inspite of an exponential growth in their hit rate. They used technology to stitch together cheap servers to form massive farms that kept their business growing. Facebook is buying expensive servers as their clientele increases……with no appreciable increase in revenue….
– Social Media is always about the next big thing….. In the 1990’s people forget that one of the earliest social media sites was SixDegrees (now part of Vignette), then there was MySpace, now there is Facebook, tomorrow something else….Social Media is evolutionary and we are always on the lookout for the next big thing. Customer loyalty is practically nil and the barriers to switching is only how long it will take to get your existing network up and running on a new platform as long as it has better features, made even easier today with features like Facebook Connect.
I predict in the next five years, a wave of consolidation in the Social Media space. As with MySpace, I doubt that Facebook and Twitter can continue as independent entities. I’m not very positive with Twitter. I really fail to see how much value can be derived from an internet sms service. Maybe if Microsoft were to add it to their Windows Live suite it might make some sense. Facebook on the other hand would be best served by being part of Google. It would be an ideal match technologically. Either that or Facebook somehow find a way to start a Paypal like service and make use of their platform for e-trading.
Having lived through the internet explosion and now seeing the same foolish valuations placed on Social Media sites, its not hard to use historical references to infer what the market may look like in five to ten years. To those who think I am excessively negative, I just hope that they are right……
Tong Hsien-Hui
Some Meowsings...... 