Social media froth

This is the problem with keeping a blog… stop writing, and people think you’ve either died or thrown a strop. Those of you who know me well may be surprised to find neither is the case - I’ve just been a bit busy. Partly because of this gap, partly because the mighty Lloyd invited me in today, I’ve stuck the Twitter badge up on the right. I could say it gives a chance for me to update you on what meeting I’m in, in realtime!, or I could say there’s now there’s another thing for me not to update. You choose. Do sign up and join me.

To catch up: I enjoyed last week’s Beers and Innovation event - a knowledgable panel including the wonderful Meg Pickard augmented by a fourth member, Tom Coates, who has written at length about the evening. My only complaint was that, as chairman, I had to shuttle our single microphone around the packed room - my feet were plenty sore the morning after. There were plenty of questions. But I’d only moan if there wasn’t.

Tom mentions some particular points that pressed his buttons. One that got me was, from a few people in the room, a fundamental, and loud, failure to understand what business models there are for social media, how they work, and why they work.

[Point of information: unless someone says otherwise, I think we can assume social media business models are driven the same as most other websites - advertising, subscriptions to premium services and skimming percentages from retail transactions. The difference is that, on a good social media site, users are fantastically engaged and active, by conventional web measures. This engagement changes the game, economically].

We had these kind of daft discussions about business models during the last bubble, and their resurfacing points to another bubble inflating in this area. Last time around, it was people insisting that no websites made money (they were wrong) and, so, that you needn’t bother waiting for the money to arrive; the business model could come after the idea itself (they were wrong, again).

Again, last night, there are people milling around the field who simply don’t get the basic principles of the businesses already online - businesses who are making real money and real profits by delivering this stuff well.

Why don’t they understand? Maybe the new arrivals have not been around the last few years during the collapse and lull; they wouldn’t have the funding, so would be doing something else. They’ve seen, but perhaps not really understood, the rise of blogs and more sophisticated social sites that have lightweight development structures but heavyweight revenues because of the fanatical loyalty they inspire from users through careful, laser-like focus on user experience.

They’ve not spoken to the single-person blog magnate who publishes a site (or several) funded by no more than Googleads, Amazon purchases and (sometimes) a little sponsorship. They’ve not spoken to the two-person development team who, thanks to new methods of development, can go from a standing start to a complex, beautiful social site, serving millions of pages, in only a few weeks.

One gobby blogger, who’s been around long enough to know better, insisted over drinks that social media will never catch on. That, in reality, social media has powered some of the most important, disruptive web businesses for years - Amazon, eBay, Flickr, MySpace especially - seemed to pass our doubter by.

Maybe he didn’t know. Maybe he didn’t make the connection; not every social media business will be called a social media business, after all. But maybe also there’s a bubble here, insofar as there are some people milling around - with the kind of gobs that tend to attract late-entry VC money - that know precious little about how it’s all working. And when they go under, we’ll all know about it.