"No Business in Social Networking" misses the point

eWeek recently featured an article by David Coursey entitled No Business in Social Networking. I tried to reply at eWeek, but I couldn’t even figure out how to get a simple line break in my comments, so I’ll post here instead.

David starts off with:

Social networks are a good thing. Everybody should have one–and everybody I know does, in some form or fashion. But whether you need an online social network and, particularly, whether you need one whose primary purpose is separating you from your money is another question entirely.

“whose primary purpose is separating you from your money”? Every commercial product or service is going to “separate you from your money”, but in exchange for something presumably more valuable to you than the money spent.

But what about a business social network like LinkedIn—which seems to eventually want to charge you maybe $10 to introduce you to someone that a friend or friend of a friend of yours already knows?

It’s already proven that people will pay money to manage their relationships. Outlook, Act, Salesforce, Siebel, you name it — they’re all about managing relationships. This is just a different kind of relationship management that none of those existing systems handle.

Right now, I’m working a large deal. I would GLADLY pay $10 or more to be able to identify ONE person out of the thousands I know who knows the primary decision-maker. But I can’t, because she’s not in the system. The system only works for those within it. So yes, I evangelize this technology, because I can be more effective with more people in the system.

LinkedIn took a survey of their users regarding pricing models, and the majority they said they wanted to pay a flat annual fee. They didn’t want to pay per transaction, because then, as you suggest, they wouldn’t be able to use it for less “valuable” purposes. They also didn’t see any point in paying by the month — they figured it’s a relatively small business expense, and their company will just pay for it.

And when it comes to the expensive pay-per-contact type networks that “business-oriented” services hope to make their money off of, they’ll need more than curiosity to attract the interest of venture money.

We have successful expensive pay-per-contact services in the real world: executive matchmaking that costs several thousand dollars, finders who get hefty fees for matching up investors with start-ups. So long as the fee is appropriately proportional to the value, I don’t see why the same model can’t work online that works in the real world.

Now, when a dating service like eHarmony, does this, I understand the pitch: Pay your money, find a mate (hopefully).

On the other hand, if people can find a use for these networks, they’d probably pay a $10 monthly fee to belong. But not more, unless these are high-value (i.e. sexual or whatever) relationships we’re creating.

Your repeated assertion that romance, or sex, is something that people will pay for, but business relationships aren’t, is surprising. Last time I checked, the financial ROI on marriage (at least for the primary wage-earner) was pretty slim. Business relationships frankly seem like an even better opportunity. If the relationships are valuable, then there’s value both in identifying the right relationships quickly, and in helping people sustain them.

For example, want an introduction to Rob Enderle? He’s a friend and if I asked him to meet with you, I bet he would. So don’t pay LinkedIn, pay me. After all, LinkedIn is just a service, the contact is mine.

That doesn’t fly. Unless I read this article, if I wanted an introduction to Rob, how am I even supposed to know that you know him? Am I supposed to spend hours of research figuring out who Rob might know until I find someone that I know, too? In LinkedIn, Spoke, ZeroDegrees, I could determine that in seconds, and my time is worth something.

But how legit is a paid introduction, do you really want your friends selling you to the highest bidder?

Exactly why there shouldn’t be referral fees. Which there aren’t. But they happen in the real world all the time. What was the point of this?

These things are really nothing new. Since the beginning of the Internet boom people have talked about making money by creating communities. Some have done it, but lots more have failed.

There are over 100 new “social networking sites” out there. I agree that the majority will fail. Why? Because without sufficient critical mass, the value of any one system is dubious. Those that find a niche and hit critical mass within it will succeed. Those that go for the mass market without a significant differentiator will not.

One final point I’ll make is that the current wave of social networking sites is a symptom of a trend, not the trend itself. The trend is the mainstreaming of the creation of meaningful business relationships through online interaction. It’s been going on in the tech and scientific communities for years, but it’s just now coming into the business mainstream. And while the social networking sites have some great additional features, Yahoo Groups, discussion forums, and mailing lists are still great places to build relationships, too.

Bottom line: people ARE using these sites to create business value. In the process of working on our book, we’ve collected dozens and dozens of success stories. I took an informal poll on Ryze, and more than 35% of the respondents had received business as a result of their participation there (and many of the respondents were new members, who wouldn’t have had sufficient time yet).

David, what would it take to convince you otherwise? You’re a sharp guy. You just need the right facts in front of you, because your experience with it so far hasn’t worked. Let me be your guide to a whole different view. Write me. Leave me a comment here. My blog will even let you format it. 😉

See also Delphi Analyst Dan Keldsen’s comments