• Read Write Web, Monday, June 2, 2008 11 AM

Social networking is at a huge crossroads, said Read Write Web's Bernard Lunn. Sites like Facebook and MySpace will either become gigantic Internets unto themselves (the so-called walled garden approach) or they will disappear completely as social networking services emerge as more of a utility like email, most likely offered by one of the Web services giants, Google, Yahoo or MSN. "Deciding which path to take is a real decision," Lunn said. "A botched choice will likely end in failure, albeit via a long, slow decline."

Ultimately, revenue will decide the winners and losers. The current assumption is advertising is the appropriate model for social networking, though this has yet to be supported by any real revenues. As Lunn points out, "the CPM comes from traditional mass media and CPC is ideally suited to search." There is no ad model native to social networking-at least not yet-and there may not necessarily be one, Lunn said: "Ominously we didn't have an effective ad model for email, which is the earliest form of social media, until Google treated email as just more search fodder for CPC." And email revenue isn't what's making the likes of Google, Yahoo, AOL, et al rich.

Because advertising in social media is almost completely out off context (users log on to Facebook to communicate with each other--they're not specifically looking for anything or passively browsing--CPM and CPC rates remain low. Because of this, social networking can only go one of two ways: either one or two will emerge with their own massive intranet (unlikely), or social networking will simply become a mass-market utility.

Read the whole story at Read Write Web »