The value of the social network

Abstract

Arguably the most revolutionary ideas of the last decade, Online Social Networks (OSNs) have redefined the network-effect driven internet business landscape. To the extent that everyone – from Hollywood to Wall Street to school children– now wants to be a part of this revolution. They have become ubiquitous – in terms of population, Facebook – one of the largest online social networks – would be the third largest country in the world! An obvious consequence of all this is an increased interest in these networks shown by users, creators of networks and investors. And this space has also seen some colossal failures, where networks with hundreds of millions of users have died virtually overnight. Therefore, it makes sense to formally study OSNs to explain how they work, and how they don't. The concept of social networks is not new – the very first social network probably formed around a campfire about 300000 years ago. The drive to interact with other people and form communities can be attributed to 'mirror' neurons that enable us to empathize with other human beingsi . A fundamental characteristic of social networks is the voluntary interaction between select individuals. But an obvious constraint here is the geographic separation of people. But the evolution of technology has been expanding the size and scope of social networks – be it the telegraph or telephone or, more recently, the internet. The World Wide Web came into being in 1991, adding a visual element to 'online' networks. The technology involved – simple, open platforms like HTML, HTTP etc – enabled more and more users of the internet to create and share contentii. One of the earliest forms of an OSN was Geocities (1994) – where people could create websites in one of 6 themed 'cities' (Hollywood, Wall Street etc). This was followed by The Globe.com in 1995 that allowed users to personalize their online experience by sharing content and interacting with other users1 . But both of these were not real time – and hence made interactions more passive. That changed with AOL's instant messenger in 1997. eBay launched in 1997, bringing in the monetary side of the network. The first features of modern OSNs came with sixdegrees.com (1997) – profile creation and listing friends. But the real pioneer in this space was Friendster (2002) that brought in the concept of connecting real world friends online 2 . Innovations post-2001 were largely a result of the evolution of Web 2.0 technologies that enabled network creators to improve user experience. The business of OSNs and Social Media began in 2003 with the launch of MySpace. This spawned many such OSNs – LinkedIn, tribe.net, classmates.com, Netlog etc. And then there was Facebook in 2004, with an agenda of connecting Harvard University students online, which later expanded to other 'exclusive' universities, and eventually, the whole world. This was followed by Twitter in 2006, another successful innovation of micro-blogging. Today, there are thousands of OSNs operating in their own domains – some ubiquitous – like Facebook, Twitter etc, and some niche (Flickr, LinkedIn, Zynga etc). The talk today is about Social Network Ecosystems where these different networks interact to create value – for users and for themselves.