• The Economist, Monday, March 24, 2008 11 AM

Social networking is definitely the next big thing, but it's not necessarily the next big moneymaker. Like Web-based email before it, social networking will evolve as a feature tied to the Web portal experience. However, like email, it's not (really) a business.

Meanwhile, as media companies bid up the value of social networks like MySpace, Facebook, and Bebo, the industry is still searching for a suitable revenue model. Recently, Google co-founder Sergey Brin admitted that "social networking inventory as a whole"--which includes its own offering, Orkut, as well as a search advertising deal with News Corp.'s MySpace--was performing worse than expected. Facebook has done even worse. The company recently admitted that it "simply did a bad job" with Beacon, an advertising program that tracks online activity and informs users of their friends' purchases or actions taken on third-party sites.

The bigger question is whether users should really have to visit a specific Web site to make use of those connections. As Forrester Research analyst Charlene Li said in a recent report, "We will look back to 2008 and think it archaic and quaint that we had to go to a destination like Facebook or LinkedIn to be social," because social media services "will be like air. They will be anywhere and everywhere we need and want them to be."

Read the whole story at The Economist »