Challenges with building a social media ‘business’

By June 26, 2008 No Comments

Andy Warren left a great comment yesterday in response to Social networks as entertainment. He wrote:

There’s been an interesting episode on Faceparty (see The Register for more details) where an almighty row has occurred between the users (who don’t pay anything for the service) and the providers (who don’t get paid to provide the service).

When a social network starts there seems to be a collaborative approach from users and developers alike, combining to build something they can all use and enjoy. A symbiotic relationship ensues. However, once a level of critical mass is reached the users start seeing themselves as “customers” and the developers as a Service Provider, almost expecting some sort of Service Level Agreement for a service they’ve never paid for. This in turn can switch to resentment and result in the users leaving for “someone who treats them better” such as another up and coming network. The resentment escalates rapidly when investment and increased valuations occur.

It will be interesting to watch how Twitter develops. It’s still in the position where users accept (and expect) that the service will be down on a regular basis but that is close to switching to resentment rather than a slight irritation. And they’ve just had new investment.

Social Networks need to be able to handle this change in the relationship with their users as part of any repositioning or transformation.

Spot on Andy.

Everyone else, if you haven’t seen it you really should read the Register article – it is hilarious, and not a little refreshing.

This is similar to the phenomenon of the user being in control that we have discussed before.

In the words of Clay Shirky communities are a ‘bargain’ between the users which determines what people will put in and get out of the service as a user. That bargain also needs to include the company providing the service. In most cases the company is looking to offer a service, usually for free, in return for making money in some other way, usually advertising. Users need to understand that, and sites need to help them get there, or ultimately people will stop building cool new services.

Faceparty is a bit different, because they are at all interested in making money, which is what puts them in a position to tell their users how it is, when many others are afraid to.