Much has been made of the latest ComScore figures which show a plateau has been reached in the major social media sites. GigaOm gives us the litany of social media sites folding saying that in the U.S. Last week, Revision3 cancelled “SocialBrew”, Monster killed Tickle, CondeNast’s shuttered Flip and Verizon decided to close up its virtually unknown network, which had managed to garner a mere 18,000 members.

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If you accept for a moment that this plateau is in fact a permanent trend, then there are two questions to be asked;

  1. Will the plateau threaten the service itself?
  2. What will be the next hi-growth area for traffic?

Does plateau = death?

Not necessarily – in the physical world there are many examples of business remaining viable with flat levels of revenue growth. But web business tends to be a little different. Social networks tend to monetise via advertising. As we all know web advertising is an emerging market and as yet somewhat unproven. It also feeds off increasing traffic rates. The result of all this is that any site with flattening traffic will generally see a fall in advertising revenue. Given the marginal (at best) financial viability of the social networking players – any fall in revenue can see them into oblivion.

It’s hard to argue therefore that a prolonged flattening of visitor numbers to these services will threaten their very existence.

What’s the next killer app?

Many, more luminary commentators than myself have spent countless hours trying to determine this – I won’t add (much) to the information out there. What I would like to do is have a look at the typical late adopter to social networking. These are (generally) people who check their email and Facebook feed maybe a few times a week. The Internet is a communication channel only – it doesn’t replace their physical world, it’s just another way to do things. They don’t live in their browsers (and don’t wish to) so the likes of micro-blogging services just don’t resonate with them.

To see where the next high growth area is, we need to look at what these late adopters are doing along with email and social media – commerce. The growth of online auctions and the like is an indicator that these users will easily be shifted to increased use of these types of offerings. What they’ll be looking for however is a service that creates the content, the community and the directness of social networking, but blends it with the ability to actually achieve something palpable on the site.

The social media offerings that will continue to prove successful are those that provide an opportunity to create a very specialised, niche forum – they’ll probably be paid networks for two reasons;

  • people are prepared to pay for a highly specialised offering
  • niche offerings have very limited monetisation pathways – pay to use being the easiest

How many of us have heard from these late adopters “but what’s the point of Facebook?”. Look for the openings where “the point” is self-evident – not just to early adopters but also to the mass market.

Summary

So – where are we heading? A number of factors are conspiring here to change things. A plateau in traffic for social media, an economic downturn and a marketplace with ever more increasing requirements in terms of relevancy, efficiency and speed.

Look for exciting new transactional models (horizontal plays) and highly specific and customised offerings (vertical plays) – both though need to provide some real value to users to be viable on an ongoing basis.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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