Why Social (Business) Networking is the Future

I am always skeptical when I here people talk about how much companies like FaceBook, mySpace, LinkedIn (and other social networking websites) are worth. Usually, they talk in the "billions" which puts them in the best class of real estate on the web. Why do they feel so confident in their worth?? I think I have a theory.....

First, I believe the Internet is transitioning back to its root of being a "personal network". For some reason in the late nineties, everything went "corporate" - with brands dominating the experience. Now, we have come full circle, and blogging, videos and even websites are becoming the dominating experience of the web - and the power and influence is shifting back into the hands of the people. Thus, social networking is taking center stage.

Despite this shift of power and presence, I still questioned why so much value was being placed on these sites - and it dawned on me, that we are not only seeing a transition of content (going from corporate-driven to user-driven) - but more importantly we are seeing the anonymous-nature of the web fade away on both sides. For the first time we are seeing inside the four-walls of corporations on the web (via blogs, video, forums, etc) and for the first time the user is exposed as well. We are no longer an IP address. Now that we are registering on these websites, and letting the site know who we are - they can understand what we like and don't like, track our behaviour, and more importantly dictate what content we should see (including ads).

So, my (aha) moment - which may not be revolutionary, but I think its worth writing down - is social (business) networking sites have "personalized the web" - and thus for the first time can offer value to both sides of the table (buyer and seller) - to create a true platform for eCommerce. Take a simple example - the banner ad. Before social networking, banner ads could be sent out to the "generic user" based on geography, and sometimes based on their behavior - but now, with "registered users" - banner ads can be targeted to users based on their personal profile, college they attended, or the music they just posted a comment on in their blog. True personalization. This is not only a major shift on the web - but more so - a major shift for advertising.

For years - advertising has been "brand" focused. Build a brand, dominate the air waves with a simple message - and everyone sees it. Now, advertising can be "personal" and be sent directly to people who's profile matches the product. This is not only more effective for the advertiser, but the user will be more engaged because it actually might be a product they want to buy.

And - the icing on the cake - the advertiser can actually know who clicked on their ad. Depending on the website, they may even get the users name, email and basic profile information.

So, we are moving from "untargeted brand ad - that hits the masses - and the advertiser doesn't know who saw it" - to - "targeted personalized ad that hits people who fit a profile, and the advertiser knows who clicked on it"

This is powerful. And this is why these social (business) networking sites are worth billions.