Complexity and Social Networks Blog

This hardly comes as a surprise: Corporations are increasingly tapping into the social capital of networks such as Facebook and MySpace, as reported in this NY Times article by Laurie J. Flynn today. From a theoretical standpoint, it makes a lot of sense: The ties in these online social networks reflect several layers of homophily (friendship, common interests, membership in various groups, partially self-selected affiliation, etc.) in addition to what usually applies to even the best organizational communities of practice. Several companies are now integrating business intelligence applications with the social Web and the Internet. Such "interrelated pools of information" bring value to business, says Flynn, mainly by fostering communication among employees, but also by better identifying job candidates and target customers. Let's just hope that Facebook will react to this development and allow the creation of different profiles for the various personae we represent on the Internet.

The article appeared in a special section of the New York Times today called "Tech Innovation". The section is filled to the brim with exciting and innovative ideas - one of these coming from the ever resourceful Bernardo Huberman of HP Labs. Together with his team he developed the prediction markets tool "Brain" (Behaviorally Robust Aggregation of Information in Networks), which can be employed to predict the demand of a new service, such as Internet television. I loved Huberman's quote a propos his brainchild: "We want to reduce the wisdom of crowds to the wisdom of 12 or 13 people." Hopefully the right ones.

Posted by Maria Binz-Scharf at 9:57 AM | Permalink | Comments (0)

I have come up with a new format for our blog. In the next couple of months I will post interviews with leading Internet entrepreneurs and venture capitalists who can share their insider knowledge on the current state and future of social software/Web 2.0. Hopefully this is inspiring to those with entrepreneurial ambitions in the area as well as interesting to researchers who want to work on the "next big thing".

Dear Thorsten, you have been involved in various internet ventures either as part of the management team (21Publish, kinkaa, Newtron, Creative Weblogging) or as investor. We are very happy that you are taking the time to answer our questions.

Please tell us about your latest activities.

Hehe - that is a broad question - I did run my first marathon, saw my first two kids born and I do continue to bootstrap two startups - Kinkaa (a meta travel search engine for Europe) and Creative Weblogging (a blog media network).

Will the social software industry be affected by the economic downturn? Have you recognized or experienced a change in entrepreneurial or investor activity within the last couple of months?

People are certainly more cautious as everyone is trying to figure out what the impacts could be (less marketing spend, less advertising). However its just psychology so far - I haven't seen any early stage deals fall apart (as it happened with many private equity deals). Overall it seems that early stage deals show a healthy consolidation but its hard to forecast this further for me.

Let's say someone would like to start a social networking venture today. What would be your recommendations? Do you believe that the ideas are still of interest to Angel investors or VC's?

They are - just look at a Hamburg (Germany) based social network for classic car ('oldtimer') lovers. It just raised funds in the end of last year. Social networks must have a convincing organic growth and should target a certain specific demographic. If there is a good business model or good idea to make money besides running ads that can indeed be an enticing mix for investors.

Google executives recently said that it is harder than expected to generate revenue from online social networks. What is your opinion on the potential revenue models for social networks?

CPMs (price per 1000 impressions) will continue to be below average compared to other internet services. Nevertheless social networks market themselves mostly and can claim enormous amounts of users with very little marketing needed. So most will break even eventually.

Many social networking platforms have made it easier for companies to mine their user data for marketing purposes. Do you think this is the right move or will the internet community strike back?

I feel it's not a good idea to move into that direction. It was felt like going 'under your skin' as a user. Most initiatives have backtracked already from their former stance.

A follow-up question. Aren't you tired of keeping your profile up to date in all those social networks. Wouldn't it be the best way to create a single XML type online identity?

Absolutely - but remember each social network has a (slightly) different purpose - my identity in LinkedIn and MySpace may never be the same.

Merging data from social software with the real world has been discussed in the past under the name of "location based services". Though we have yet to see applications and devices that are available and used by a majority of users. When and how could this change?

It must become ubiquitous - all (or most) phones need GPS. Data plans must be included into a normal mobile phone subscription. Mobile phone displays and UI must improve so that even your grandma can login to Facebook from her mobile phone. Seems a coupe of years off - judging from my grandma who has yet to buy a mobile phone...

As a pan-european investor you are seeing and hearing about trends before they emerge. Is there an area of social software that we should be aware of in the near future? Will we be seeing more crowd based business concepts such as the trend to allow users to share almost anything?

I like the idea of Amazon Mechnical Turk a lot - it's basically an API for the human mind. It's still a lot of theory and only so much practice, but social networks with all the user data could eventually build their business on a similar platform. Social networks as an API to knowledge and human services?
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I kept it short - hope it still helps. Please let me know if you have any more questions.
Best, TJ

Torsten Jacobi or 'TJ' is a serial entrepreneur and investor with experience in the software and media industry in the U.S. and Europe. He lives close to Silicon Valley with his family.

Posted by Alexander Schellong at 11:15 AM | Permalink | Comments (0)

Today's WSJ reports that Google executives said the company was having a harder time than it expected generating ad revenue on social-networking sites. In particular, this would put Microsoft's evaluation of Facebook under scrutiny. Around the world, other OSN ventures such as Facebook recently introduced new terms of business to make it easier to utilize the user information for marketing purposes. Many members complained about the move, some even left. Therefore, privacy is still of importance to many users and strategies discussed in Relationship Marketing (see also permission marketing) might be the right move for OSN ventures.

Posted by Alexander Schellong at 7:48 AM | Permalink | Comments (0)