More ecommerce sites are discovering the power of community and community generated content. Today Netflix made a significant announcement about enabling its movie-loving users to share their lists with one another.
When Overstock decided to take on eBay, part of their formula was to use social networking functionality so that family and friends can help users know who to trust in the auction community.
I believe many social networking sites will be profitable. Ryze was the first to be profitable. LinkedIn believes they will be fairly soon. Friendster has allied itself with eHarmony and will therefore generate a good deal of revenue from online matchmaking.
The reason is that the cost of building a social network is low, the cost of hosting continues to decline, members come by the thousands due to the viral nature of social networking, and the marketing costs can be close to zero. As premium services are layered on top of the free basic service, those social networks with millions of users will not have difficulty generating revenue and ultimately profits.
I’m bullish about the future of social networks for these reasons.
I’m not sure venture capitalists will see huge returns on these sites, but I believe many of the sites will survive and be profitable.