Social Networking Sites

Barron’s chimes in:

Social-networking sites are popping up like search portals and community sites did during the late ‘Nineties. The similarity is enough to give you the creeps, considering how the dot-com nightmare played out. But that may be a knee-jerk reaction. A close look at this latest trend shows that its potential for harnessing the power of personal connections and changing consumer behavior is very real.

One such start-up is, a seven-week-old site (yes, seven weeks) that emphasizes hiring and employment. The premise is that most job leads and hirings actually are facilitated by personal contact. Users of pass job leads to one another and even put in good words for their cyberfriends with employers. Most other job sites, by contrast, are little more than bulletin boards.

“This medium lends itself well to employment and hiring,” says founder Mark Pincus.

To understand, it helps to understand Friendster, the big Kahuna of social networking. While Friendster has attracted stellar traffic and even stronger buzz, it is essentially a dating service that is free of charge. Thus, its business model isn’t exactly clear, but that hasn’t scared off potential suitors or investors, which in and of itself is a bit scary. Some venture capitalists and investment bankers suggest that, because of its lack of a stand-alone business model, Friendster would make an excellent acquisition for any of the major search engines.

Social-networking companies could prove menacing to many of the paid-search businesses whose stocks have been soaring off of the charts. Pincus, who is also an investor in Friendster, contends that the dating service could be putting a chink in the armor of Barry Diller’s InterActive. Paid memberships for InterActive’s failed to increase from the first quarter to the second quarter of this year, according to the company’s second quarter earnings release.

InterActive’s also is potentially vulnerable to social-networking job sites.

Ralph Terkowitz, chief technology officer of The Washington Post, agrees. “Tribe creates the potential for the next-generation classified business,” says Terkowitz, whose company is a Tribe investor.

The point about social networks providing potential competition to classifieds is interesting. There are many times when I have thought about having access to a network where we could advertise at a low cost for specific things: for example, programmers and support engineers, and old computers. An ad in the Times of India classifieds section in Mumbai will cost about Rs 4,000 (USD 85). Being able to selectively spread the word among a smaller, known group may be quite useful.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.