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Evolution of Social Networks — The Underlying Principle

Social networking, as we understand it today, comprises three major elements:
A) Content
B) Participants
C) Activity

The cross product of all of the above three lends to the gravitas of the social network and its effective reach into many aspects of the daily routine of a user.
What has transpired over the last few years is the thought that social networks should be free. The fundamental presumption is that a free network would generate activity that would gain traction and sufficient critical mass to justify its zero price value. Once the network has been able to successfully capture meaningful mind share, the next big thing would be to harness the network for revenue opportunities in order to later add quality content and greater expanse … and the cycle would be a positively self-perpetuating cycle that would theoretically know no bounds.

All of the above is fine and dandy. To reiterate, this has been the traditional model and it has continued to be overtly championed so much so that a significant number of such networks still embrace this concept. But have we stepped back and reflected upon this thought that have crystallized as a de facto model over the last few years!
I think we have, and the market is responding accordingly. I am a firm believer in the market system, as I have been steeped in the traditional compositions of Hayek, Schumpeter, Mises and the Austrian school of thought: their thesis being that the price mechanism is the big leveler. Price is not simply that numerical tag on a good or service that I am just referring to: rather, it is the abstraction of the definition that has significantly huge relevance in the economics of social networks and long-term virality and sustainability. Price is the measure of value determined by the laws of demand and supply. It is the spontaneous emergence of value created across several ecosystems that one may be immediately or indirectly connected to … but no one could or would have enough information to gauge or for that matter guide the whole toward a directed end. The value that is imputed in the price quotient changes: that much is obvious! It is governed by what Keynes had called once – the animal spirits. That fact still holds true and these “spirits” can advance or collapse societies in short notice. So what are the implications, if you will, of this short diatribe of economic thought upon social networks and the urban myth of FREE?

Free is good. Yet, Milton Friedman harangued at that word – He said, “There is no such thing as a free lunch”. But we still believe that free is the price that is most acceptable to consumers, since it would create monetizable opportunities on pure volume. Freemium became the order of the day. Get the barbarians into the gate and then cross-sell and up-sell to your heart’s content. But all along that strain of logic, we have forgotten the Friedman adage – for indeed, the barbarians at the gate are paying a price – time, energy, their conversations, their rants and rave, their hopes, their dreams – all potential fodder in the “free” social network ecosystem. What we are doing is that our technologies are creating a petri dish for guinea pigs and the enablers are forcing themselves upon the sensibilities of these “barbarians”. The common thinking – We want them in but once in, we can then strafe their sensibilities with what we determine are contextual ads and offers and relevant value parameters that they would appreciate. But all of a sudden the market has caught on to that. The house is falling down with too many barbarians through the gate; and these “barbarians” care less and less. They become cliques and guilds in a closed environment; they become oblivious to the big brother; they revolt with their attention; they shut their minds, their hearts, and yes … they shut their wallets. Yet they are there for the simple price of being part of small but meaningful conversations … a psychological need to belong, a sense of loyalty to their immediate virtual neighbors. But the noise around is overwhelming and it drowns the tidbits of conversation … so a need emerges wherein there these folks will pay for silence. The conversations will continue; conversations which have the added value of cultural diversity fuelled by the dissolution of geographical boundaries … the conversations are weighed by meaning and gravitas; a modus operandi of respect and mutual understanding … it is my contention that people are willing to pay a price for the silence in order to avert white noise and create more meaning.

So now emerges the niche networks! They offer the insulation from irrelevance: people want to be relevant; they want their conversations to be heard. They would want to reduce it to fireside chats and they measure the meaning over sips of coffee. Information and conversations are balkanized; the quality is enhanced and generally uniformed but quality ensues. The patterns of conversation become the springboard for native monetization. So we will focus on natively monetizing the buzz between connections; we will inspect the patterns of exchange and giving; we will attribute a value and we believe that a small fee will do justice to the calculus of consent.