“Social networking will never make any money…”

There is a certain cyclical inevitability to these things. A year ago we were in the “Whoa, look at all the money these people are getting” stage. Now, a year later, we are in the “Oh-oh, social software companies are running out of money” stage.

A year after Silicon Valley entrepreneurs launched a slew of faddish social-networking companies — Web sites like Friendster, Tribe Networks and LinkedIn — reality is beginning to bite.

Most of these sites are still seeing large numbers of active users sign up for what they offer, which is essentially an online network of contacts with friends or business partners, and their friends. But with all the buzz came a lot of me-too companies hoping to crash the party, making it difficult for any of them — even the leaders — to make users pay.

That’s why social networking sites are now looking for ways to make money. And it’s all leading to some serious jostling, as they are courted, or nurtured internally, by big incumbent players like Monster, Yahoo and CareerBuilder eager to cash in on their online traffic.

There are two strategies now in play. The first: Some start-ups have decided social networking will never make any money…


  1. Friendster = PET ROCK circa 2003