"Trends watcher" has been looking at the phenomenon that is social networking: what is the social impact, and what's the financial outlook?

For 2 years now, the obsessive compulsion that they have triggered has meant that we’ve been talking of little else. And yet it’s really nothing new. They’ve been waiting in the wings for 5 years now.

The figures speak for themselves: social networking sites have overtaken email in terms of activity – the time spent on them went up by 266% in 2008 and they take up 1/11th of the total time we spend online.

You can’t talk about social networking without mentioning Facebook. The success it has enjoyed among 14-49 year olds is mind-blowing, and it’s not just youngsters who are hooked.

In comparison, competitors are lagging behind a bit. Only a few countries are fighting back with their own local networking sites: Brazil with Orkut (very popular, accessed by 70% of Brazilian Internet users), China with 51 or Xiaonei (which can be explained by the major cultural differences), or France with its very own Copains d’Avant.

 

But leaving aside the numbers, it is their impact on society that is most intriguing:

• Totally connected: borders are overcome, bringing new meaning to the concept of a global community. Geographical locations are no longer an issue for people who are connected at all times, on their computer or their mobile (Facebook is the 4th most popular application to be downloaded to iPhones, and the Twitter micro-blogging service is making quite a splash)
• Loss of privacy: the notion of private life is clearly being called into question. There’s no doubt that the intrusion into our personal space combined with the commercial use of accumulated data requires us to be more vigilant. But the loss of privacy is also the consequence of an inevitable social development: the evaporation of the barriers between public and private life which we have brought about ourselves.

  

But behind the entertaining social façade, what does the future hold for social networking?

Because in these times where we all expect to get something for nothing, the optimum economic model has not yet been defined. Some people are starting to point out the lack of profitability in these social networks, and thinking about how this can be remedied:

• Advertising embedded in the pages: the most logical way of making money, but only MySpace seems to have been able to pull this off, attracting a significant number of advertisers thanks to its wide range of banner formats and the options for customising pages. Getting advertising just right is becoming more and more focused (special interests, geolocation), but Internet-users’ impatience is growing as advertising becomes too intrusive.
• Development of applications that you have to pay for: something with huge financial potential. The iPhone demonstrates perfectly how much money can be generated from applications that can be downloaded from iTunes (1 billion downloads in less than 2 years).
• Partnerships with brands to develop content for specific communities. For social networking sites, this is a very clever way of cashing in on their databases. For the brands, it’s a great way of cementing rewarding relationships with existing or potential customers.

 

Ultimately, social networking sites have huge potential, but more socially than financially. For brands, they are interesting ways of promoting an image, if an effort is made to come up with new strategies and specific content. The perfect opportunity to rethink the whole marketing experience.