Social Networking: Building a Better Local Online Marketplace

The folks at the Kelsey Group were kind enough to send me a copy of Social Networking: Building a Better Local Online Marketplace, by Carlotta Mast with Greg Sterling. This is a useful (but not free) 54-page overview of the major business models in the social network space, with a focus on companies such as Tribe.net and Craigslist which are working to monetize local communities.

The most astounding statistic in the report: according to the World Association of Newspapers: 5% of all US classifieds are online. I’m very surprised that the figure is so low. Translation: there are many opportunities for entrepreneurs to take the other 95% online.

I completely agree with the Kelsey Group’s skepticism about most of the so-called social network sites, many of which have generated minimal revenue. They observe that once you sign up on a service like Friendster, “it’s very easy to forget about the site.”

Clay Shirky recently defined social software as “stuff that gets spammed”. Spam, trolls, etc. are inevitable evils of social software. The report spends a fair amount of time contrasting Tribe.net and Craigslist. One point they don’t underline enough: the two sites have different mechanisms for generating trust and killing off spam and trolls. Tribe uses mainly a social network functionality; Craigslist uses a very effective community policing mechanism and a strong focus on customer service.

So far, at least, Craigslist has certainly achived a much greater user base. Some people said it couldn’t scale, but they seem to be very functional even with over 1.9 billion page views a month (according to a recent email from Craig Newmark). If I were in Tribe’s management team, I would zoom in on emulating Craigslist’s obsessive community policing, which has clearly worked fairly well. In particular, Craigslist makes it extremely easy to flag inappropriate ads. Craiglist is a powerful example of the efficacy and popularity of the Edward Tufte/ Google/ CreativeGood/ Bauhaus school of minimalist functional design.

The report quotes Jim Buckmaster, Craigslist CEO, as saying that they have received zero requests from users for social network functionality. Some would say that’s like 3M complaining that they didn’t get requests to invent Post-It notes. Myself, I think that for many of the transactions on Craigslist (e.g., online personals, job listings), having an intermediary social network is really not that critical.