Dec 072010
 
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Social Networking in Web 2.0: Plaxo & LinkedIn

In my last post, I discussed the origins of social networking online, beginning with CompuServe, Prodigy, the Well, then the rise of AOL, Geocities and Yahoo Groups. Next began the era of “spam-based” networks of which Plaxo (founded in 2002) was the king.  Co-founded by Sean Parker (yes, the same one who worked with Mark Zuckerberg in the early days of Facebook), it encouraged groups of people to email everybody in their email address books and “connect” on Plaxo so that when any of their contact information was changed online it could by synchronized with everybody’s local computer version and thus we could all stay in touch.

There was a backlash against the Plaxo spamming yet it paved the way for everybody who came after them to get users to drive viral adoption and we’d throw up our arms and say, “oh boy, here goes another social network that my friends are going to spam me about” mentality that made it acceptable for everybody who came afterward.

And come after they did.  While Plaxo never figured out what to do with us once we were all connected online, LinkedIn did.  They formed us into networks of networkers.  It was suddenly now not only about whom I was connected to, but who they knew and how I could get access to them.  We suddenly all wanted intros.  It added a new dimension to online social networks … business networking.  And they encouraged us to part with a lot more data about ourselves making LinkedIn our virtual resume.

And importantly Web 2.0 ushered in the era of “participation” – we all know that.  But less considered is the fact that the success of the Web 2.0 companies versus the Web 1.0 ones were enhanced because they coincided with hardware that allowed us to capture more content instantly – namely images and video – otherwide Web 2.0 might have been a lot less differentiated.  Suddenly we were all creating blogs on Blogger.com, Typepad & WordPress.  We started uploading images of ourselves to our blogs.

But the masses didn’t want to blog.  They wanted to publish pictures of themselves & their friends, share them, communicate with others, stay connected, have common experiences, find people to date, etc.  As I’ve said, it’s the same shit as the 1980?s – I swear.

Modern Social Networking: Friendster, MySpace & Facebook

We all know Friendster was the trailblazer in this category allowing people to create personal pages and connect to other people in a LinkedIn style but without the “business” and with a little more interactivity (let’s face it, for the longest time most users “friended” people on LinkedIn but then never really did much else).  But Friendster’s computer systems couldn’t keep up with the explosive growth (reportedly due to the complexity of the security model set up to control connections, privacy and authenticity of users) so MySpace was hot on the heels and swept up the market in a very rapid ascent.  Friendster was DOA.

And there it was – MySpace was growing at the exact time we all had cheap digital cameras, smartphones with cameras and new, cheap video cameras like the Flip that allowed us to create video.

Except that MySpace didn’t handle images or video well.  Luckily Photobucket & ImageShack did.  So users put all their photos on Photobucket & their videos on YouTube and shared them with their friends through MySpace.

Fox bought MySpace for $580 million and then did a deal with Google worth more than the purchase price to serve up ads.  For a nanosecond Rupert Murdoch seemed like the smartest guy on the Internet.  Google acquired YouTube for $1.65 billion, which at the time seemed laughably high and now seems prescient.  Google turned YouTube into one of the most valuable future Internet properties.  MySpace would have liked to own YouTube but didn’t have the public stock valuation to purchase them at the price that Google did.

MySpace later bought Photobucket for $250 million + $50 million earn out.  It did not have the same success as Google’s acquisition and MySpace sold Photobucket 2 years later to a relatively unknown Seattle-based startup called Ontela for a reportedly $60 million.

Murdoch seethed at these “startups” getting rich off the back of MySpace.  The conventional wisdom at Fox’s headquarters is that MySpace had “made” both YouTube & Photobucket by allowing them distribution.  MySpace vowed not to create anymore million dollar successes off of their backs that Google could then acquire.

So Fox ludicrously set up a quasi internal innovation center called Slingshot Labs.  The goal was to create innovations outside of MySpace and then MySpace would acquire them at pre-agreed prices based on how well they performed.  This was Politburo-style innovation and was laughable. I literally snortled when I heard that they were going to do this.  It was obviously a scheme set up by young entrepreneurs to line their pockets and some big-company executives who didn’t understand innovation.

Enter Facebook.  It had grown stratospherically from 2004-2007 to 100 million users, which actually was slightly smaller in December 2007 then MySpace was.  Facebook was everything that MySpace wasn’t.  It was: up-market, exclusive, urban, elite, aesthetically pleasing, ad-free and users were verified.  MySpace was: scantily dressed, teenaged, middle-America, design chaos and on ad steroids.

But the critical distinction in the direction of both companies was that while MySpace was putting up moats to keep outside companies from innovating and making money off their backs, Facebook took the opposite approach.  It launched open API’s and created a platform whereby third-party developers could come build any app they wanted and Facebook didn’t even want (yet) to take any money from them to do so.  So along come companies like Slide, RockYou & Zynga who wanted to build apps across all the social networks but were green-lighted the hardest by Mark Zuckerberg.

Read more . . .

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