Working Thoughts on Social Networking: #1 A Framing Exercise

Between my first blog (Tech & GeoPolitics) in 2006-2007 and SIWDT, I have written on and off about social networking.  I am by no means a social networking expert, but I have been using email since 1990 so I am experienced in communicating with people in electronic form.  I have also been Facebook free since February 2011.  I tweet a few times a week and I have a profile on Linkedin.  I have written various things about social networking in the past and most of it was speculative and humorous in nature.

In a conversation with a colleague the other day, we were stitching together various data points looking for some sort of pattern recognition.  I typically call these framing events, where I attempt to link various data points to determine if there is any conclusion supported by the data set.  Our conversation started by looking at charts of ZNGA, YELP, GRPN, FB, etc.  The following is a mash-up of things I wrote in 2006-2007 and things I am thinking about five years later:

Frame 1: Dude, Where is my Avatar: What ever happened to those CEOs turning into Avatars and entering virtual worlds?  It kind of seems silly now that we would create Avatars and visit the land of companies in virtual forms to learn about products, but just a few years ago it was the next big thing.

Frame 2: IPOs as Distribution Mechanisms: In the first internet bubble (i.e. 1990s) it seems that an IPO was really a funding mechanism.  Many startups including service providers (i.e. ISPs and CLECs) used debt and equity markets to fund business expansion.  Some of these companies were successful and many were not.  A decade later it seems the web 2.0 companies waited much longer till they had maturer business models before going public.  This also changed how the IPO event was used.  It appears that social networking companies use the public markets as a distribution mechanism rather than a funding mechanism as did the 1990s era companies.  A simple search on FB sellers yields these articles here, here, here and here.  Perhaps this is a result of the development of secondary markets for privately held shares.  Investors and employees have options to sell shares prior to a public listing, so as the company builds in size it needs are large offering event to support the number of shares.  Just an observation.

Frame 3: The Advertising Conundrum: Personally, I hate advertisements.  I have not read a daily paper or watched the evening news in years, which I think are just advertisement mechanisms.  When I hear people tell me that the business plan of a website is to generate revenues through advertising, I have no interest.  Here is an article on the SEC questioning the value of Facebook’s mobile ad business.  I see the value of Facebook as a social interaction tool, but if it just becomes an advertising delivery tool I have no interest.  The article referenced above is a nice summary, if you want to read the details they can be found here, here, here and here.  Facebook has to generate revenues through ads, because it is unlikely that people would pay a premium for an ad free business on a large enough scale to be meaningful to a person’s social circle.

Frame 4: The Embarrassment Conundrum: Kaplan and others have done studies showing that what you put on line shapes the perception of you by others.

Frame 5:  Is it a Fad?: I think this site has some interesting charts on Second Life.  In the advanced chart section is the following chart which implies that Second Life users online peaked in January/February 2009, which was when the equity markets were making new lows.  I do not know what to conclude from that, but it seem like the buzz about Second Life is less than it was six years ago.  Zynga monthly subscriber numbers would have declined if not for acquisitions.  (Hmm, sounds like another company I blog about).

Frame 6: Virtual Worlds are Virtual: World of Warcraft (WoW) cities were wiped out by a “exploit.”  Blizzard did issue a statement about the event as it killed all the characters in several cities.  The good news is the cities affected are now safe for exploration.

Frame 7: New Currencies in the Fiat World and Gold Bug Fever: If you never read this article on Bitcoin, you should.

Frame 8: Here is something I wrote back in 2007 on virtual worlds and virtual currencies (note see Frame 3 above the the discussion between FB and the SEC on virtual products, virtual transactions, virtual revenues):

Here is a link about in game trading of virtual assets.  I think this is interesting when you frame it with this article on eBay removing virtual items from its auction site.  I wonder if anyone finds this hypocritical.  The eBay business model is to provide a virtual market for the exchange of goods.  How can they claim that the exchange of virtual assets in a virtual world is ethically questionable?  I know the real issue is tracking the exchange of assets, but it does appear hypocritical and I think deep down eBay is concerned that virtual worlds that are becoming economic constructs for the exchange of goods and services is really a competitive business model.

What I like the most about artificial worlds is that the companies that own the avatar worlds (i.e. markets) set the exchange rates.  What would happen one day if Linden Labs decided to devalue the Linden Dollar?  Will there be an outcry?  Will Congress hold hearings?  Will a Federal Reserve Chairman of the future ask that Linden Dollars be pegged to the dollar or the RMB or the Euro?   Will Ronald McKinnon write a companion to his book entitled Exchange Rates in the Artificial World?  Cleary there is no comparison between Linden Dollars and global currency exchanges, but the hypothesis is interesting and profound to think about when you consider that avatar sites are in their infancy.

It was bound to happen.  Here is a link to some text on the taxation of gaming assets.  I can see it now.  You are going to have to file a 1099-Articfical World Asset Declaration for the IRS every year.  Which artificial world site will be the first to automatically email a 1099 statement at the end of each calendar year with quarterly statements for those players with artificial wealth exceeding a certain threshold?

Frame 9: Old Content May Not Always Age Gracefully: Recently there was confusion about old private messages showing up on user’s walls.  The source of the confusion was really the roll out of a new Timeline on FB.  More here; my point is that content on social sites might be like emails, they never die and come back to haunt years latter.

Frame 10: Government Tracking: If you use social media, private institutions like colleges, potential employers and many Governments want to track and analyze what you post and what you do.  Will people be uncomfortable with this in the future?  Some articles here, here, here, here, here and here.  The last link is interesting if you post a lot of pics on line and presently think a government organization is looking for you.  It is not only the US Government monitoring, you can find articles on other nation-states like Germany and plenty of concerns about China and other nation-states.  The net result of our collective desire to post information about ourselves is others will collect it and run analytics against it.

Frame 11: How Do Social Networking Sites Reach End of Life:  Internet Archaeologists Find Ruins Of ‘Friendster’ Civilization.  That link is one of my favorite Onion creations.  I do wonder what is the lifespan of an on-line site and how long do users say engaged.  We do have some history here with sites like AOL, GeoCities, MySpace, Tripod, The WELL, etc.  One aspect of social networking I find taxing is the need to check in, post and use the various programs like Facebook, Twitter, Path, Instagram, FourSquare, etc.  It is a lot of work to stay engaged.  How long will people stay engaged?  Do people become tired?  I think this is the same problem that Ancestry.com must confront.  My wife and I became really engaged with the site for a few months in 2011.  Then our interest faded.  I logged in last night because I got a renewal notice and found out that neither of us had checked in for months.  Our content was there, it is like a repository of our families history, but I am wondering should I continue to pay them to keep it if we are not using it?

I picked up my wife’s iPad the other night and scrolled through her FB wall.  It was full of pics of food, kids, clothing and various other pithy stuff.  The young ladies were all going out on dates and posting their couture choice, the older ladies where making generational links and observations between their kids and parents.  It is all good, but how long can a person meaningfully post pictures of their evening cocktail choice?  Is there enough mental substance in the material to keep a person engaged year after year?  Is there a theta calculation?  The opposite view on the transformation from the old world to the new world is located here, 112 slides from Mary Meeker.  There are some good points in the presentation.  I like Uber too and I use Evernote.  My wife uses Pinterest, although Pinterest lost my interest after a few weeks.  If you take the time to review the Meeker slides, pay attention to slide #35 and the next 50 which follow.  Slide #35 seems like a disconnect from reality to me.

If the point of using a new world site or app is to consume advertising, why is that a compelling long term reason to use something?  It is a lot of work to use social sites and mobile apps and I think they are missing a deeper level of personal satisfaction.  We are being social through virtual means and it is a lot of work to maintain that level of social status, which we do alone.  I like the app Path, but I am not sure how they are going to make money.  If it turns into an ad delivery program I will delete it.  If they charge me a nominal fee per year, I might be interested.

About a year ago, I had a My Dinner with Andre moment with a friend.  He is a few years older than me and we met for dinner at a trend local spot that is highly Zagat, Yelp and FourSquare rated.  Over drinks and food we had a long conversation about careers and family.  He is a reformed tech person now working in a completely different field.  He was looking back on his life as said that in your 20s you act with little care in the world, in your 30s you pretend to be someone you are not and it is only when you are in your 40s that you begin to have honest conversations with people about matters of substance.  I wonder if this is how social networking sites will evolve.  The 2000s were the 20s for social networking sites, the 2010s will be the 30s when they pretend to be all the things they are not and it will not be until the 2020s that we figure out what they really are and have a meaningful relationship with them.

/wrk