Has time really passed so quickly? Are we already back in the middle of yet another hype promising nine-figure turnover and the renewed conquering of the Internet – at least until ­reality catches up in the not so distant future? When conversation turns to social networks in the Internet names such as MySpace, StudiVZ, Xing or Facebook come to mind, names which were hardly known a few years ago but which are now enjoying immense media interest and great popularity with the users. 

The ‘social network’ business model is not a new idea

In October 2007 Microsoft paid a nine-figure sum for a small minority in Facebook and the related advertising rights, whereby the – theoretical – value of the entire company was calculated by Microsoft to be around 15 billion dollars. An incredible sum for a company which is just a few years old, with a turnover¹  which doesn’t justify this type of valuation at all. But as we have learnt from the past: investors will speculate on the future, and he who hesitates may miss out on the new Google.

However, there are indications that social network services in the Internet are more than just a short term fad, and that they actually do satisfy the real needs of an increasingly large group of users – thus fulfilling the basic requirement for a successful business model. Communication and social networking are the main drivers here, both for private use and in the globalized corporate world. The user looks for groups of people with similar interests or business partners, and then tries to get into contact with them, to exchange information with them, or simply to let them know what one is doing and what one has to offer. In the analog world there is also a huge range of products and services aimed at the satisfaction of this need. Just consider sports clubs, postal services, interest groups, industrial exhibitions, or dating agencies.

The most common business models applied by social networks in the Internet, i.e. financing through advertising and ­subscriptions, are nothing new either and simply remind us of the successful mechanisms used by other media, TV for ­example. The arguments determining the ‘value’ of an Internet service have similar parameters to those used in the case of television i.e ­viewer quotas (‘page views’, ‘clicks’) and viewer profiles, because of their interest to the advertising industry. The extent to which Internet and television are now competing for user interest can be seen in periodic research which reveals that an increasing ­share of leisure time which was previously used to watch tele­vision or for reading is now devoted to Internet services.