Once again I am asking myself what would Twitter, Facebook and MySpace look like in the Real World not the cyber world. Two years ago I was on an acquisition project to acquire Lime and Zaadz; healthy and alternative living social networks. At the time, I was thinking about what these social networking sites would be in the real world. What and where would they exist, what are their real world counterparts? I was thinking about this because I needed to come up with a revenue model to generate a profit. I thought that maybe by analyzing real world counterparts I would discover their revenue model.
My theory is these social networks are like nightclubs or boutique restaurants. They are cyclical and based on the new music, dance, cuisine or chef of the day. The audience changes or evolves to a new club with new technology and gadgets. Once a club or restaurant on the real world becomes too well known or corporate, people usually move on to another new hot spot. Its not cool anymore.
I have not seen these new Web 2.0 social networking sites make real profits to pay for themselves. I guess MySpace made a small profit but I think most of these sites will take the path of AOL, the mother of all Social Networking sites.
I think Web Users are spoiled. We’ve never had to contend with commercials and when we do, we move on to another site. That’s why I do not think you will see these social networking sites make real profits. Unless they figure out a way to sell a tangible product not advertising alone.
I remember when a company’s valuation was based on profitability not on membership / users. I don’t think the TV or newspaper revenue model will work for the Internet. Heck, its not even working for those industries now. They are all going out of business or cutting costs right and left.
So like people say, never own a restaurant. It will own you!