Knowledge@Wharton writes about the downside:
Wharton experts note that expansion is a bigger issue for social networking sites than for other businesses, which don’t rely as heavily on user input. “Businesses based on community can become fragmented so much that they splinter off the people who were attracted to them in the first place,” says Bell.
While social networking sites wrestle with the expansion dilemma, Bell argues that the marketing problem these firms face is similar to the issues faced by other companies trying to segment a market. For instance, if Toyota’s Scion unit initially targets younger buyers, the cars could lose their cachet if Baby Boomers start buying them.