A little more on social networking sites
In response to the Digg item this morning, a plugged-in friend who runs this spirited, sometimes goofy blog writes:
I think the social networking sites will face a day of reckoning in the not too distant future when it becomes obvious that their users do not respond to the ads. A Jupiter analyst told me a few months ago that MySpace had some of the cheapest/least desirable real estate on the Web. Investors take note. Social Networking Sites Fuel E-Commerce Traffic
by Mark Walsh, Thursday, Dec 7, 2006 6:00 AM ET SOCIAL NETWORKING SITES INCLUDING MYSPACE and Facebook are driving a bigger portion of traffic to retail sites than a year ago, according to new research by Hitwise. Social sites are driving more than 6% of retail traffic, up from 2.9% in 2005. MySpace alone accounted for about one-third of that traffic. The increase in retail traffic reflects social sites increasingly becoming a starting point for Web users. "What we're seeing is a trend among social networking sites, particularly MySpace, becoming a home base for Internet users," said Bill Tancer, general manager of global research at Hitwise. That trend in turn generates more traffic from social sites to online retailers. Those are interesting figures you cite from Hitwise, Iti, but I'd like to know a bit more. For example, which genres of Web sites are responsible for driving the remaining 94 percent? Or, more to the point: if you are part of the fastest growing segment of Web sites, would you be satisfied with single-digit traffic generation? Don't get me wrong. I find the growth of social media sites fascinating, and I believe there is more growth yet to come -- particularly overseas. (Still, it must be noted, Facebook is a complete unknown entity outside of the U.S., thus from this side of the Atlantic I find an $8 billion -- or 6 billion euro -- valuation little more than hot air.) But as we learned in 1999 and 2000, there's a big difference between surging traffic and ad revenue potential. Discussing pie-in-the-sky valuations publicly is dangerous territory, for all but the lucky few who can take the cash and run.
And, on a final point, I should elaborate on the Jupiter analysis cited earlier. As of August, MySpace was carrying a CPM of 10 U.S. cents, primarily because there is such a vast ghetto of uninteresting user-generated pages that attract barely a blip of interest. For more details the story is here: http://technology.timesonline.co.uk/article/0,,20411-2303371,00.html 
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