Chris Shipley of IDG on online social networks

Chris Shipley of IDG is the executive producer of NetworkWorld’s DEMO Conferences and Editor of DEMOletter. She’s been writing a lot about online social networks lately. Her journey over just the last couple of months is typical of people as they start to “get it”.

In January, she wrote about LinkedIn and other social networking services:

Social networking is a tech bubble that I fear is about to burst. Months ago, venture investors and entrepreneurs jumped on the pump and began inflating the idea that there was money to be made by exploiting so-called six degrees of separation.

I can’t believe that there are more people on this planet who would take a call from me than from either of the aforementioned venture capitalists. And I’m very certain I know no one directly who lives in Finland. So what’s going on here?

LinkedIn has made the mistake of confusing contacts with a business network. As a result, they’ve created a service that is only minimally useful.

In none of those instances have I received confirmation that a successful and valuable connection has been made. So why keep up the game?

My theory: We’re afraid not to. Social networks play on our desire to be a part of something big. So we join, and we wait for something big to happen. I don’t suspect it will. At least not in these large public networks.

A month later she’s starting to shift, but still skeptical:

[S]ocial networking eludes a business model that makes fundamental sense. Without a clear avenue to revenue that returns value to customers and dividends to shareholders, social networking runs the risk of being just another business bubble. To date, I’ve only seen one company – Spoke Software – that has a clear path to revenue.

But even as I puzzle over the business value of social networking companies, I do recognize that social networking systems can be highly useful. Indeed, since I first wrote about LinkedIn on January 20, 2004, my opinion of the service has evolved.

Then, I thought that these networks were little more than popularity polls – who was most connected and to whom. In recent weeks, however, something has changed. The network (in this case, via LinkedIn) has become more useful. Perhaps my personal network – now with some 200 direct connections and a total reach of more than 178,000 people – has finally reached some critical mass. Perhaps network members have had a collective epiphany that has revealed that the value of such a network is more than membership. The value is in actively working the network to your business benefit. Whatever the reason, I now feel that I am part of an ecosystem of business contacts that, when properly respected and leveraged, can deliver value to me and to the members of my immediate network.

One thing is clear: Social networking is more than a fad, if not yet a business.

That’s what happens when you keep an open mind and actually try to work the system. Chris’s comments sparked a lot of reader response:

Few topics of this newsletter hit a nerve as sharply as social networking has. In fact, I get more mail when I write on this topic than I seem to receive on all other topics combined. (Something I suppose I should keep in mind when things get a little lonely in my office.)

including one from yours truly regarding a correction about revenue models:

“In your recent article, ‘Social Networks Revisited,’ you stated that only Spoke has a clear path to revenue. . . . ContactNetwork has slipped in under the radar – they haven’t gotten a lot of press coverage, but they already have nearly 20 paying customers and are cash-flow-positive. Ryze and Ecademy are both profitable, as is Craigslist (technically, not a ‘social networking site,’ because you can’t designate friends on there, but in reality a social networking site, because that’s what you do on there). Tribe also has a future revenue model that has been proven already by Craigslist.” – Scott A.

This is just a great example of what happens to one’s perception of online social networks as you get involved. The value is rarely there on day one for real business relationships—you have to work them, participate, and build up critical mass in your network. Day one, you’re going to get chit-chat.

Social networking is a model of increasing returns. The longer you do it, the more value you get from less effort. It’s an investment.

Chris was also nice enough to link (unsolicited) to our new Guide to Online Social Networks and Business Communities.

Thanks, Chris! Now, about that next DEMO Conference…