Web networking hardly limited to one site

CHICAGO—Like many Web users of a certain age, Ralph Dahm doesn’t have a profile page at MySpace.com or participate in the gossipy give-and-take at Facebook.com.

“That’s more for the kids,” said the 55-year-old job recruiter for technology companies. But that doesn’t make Dahm a reluctant participant in the social networking trend exploding across the Internet.

Indeed, he has more than 5,200 contacts through Linkedin.com, a social tool for business acquaintances that he actively maintains each day. And, unlike the kids who collect thousands of friends on MySpace in an effort to appear popular, Dahm can tell you a little bit about each of his contacts.

“No. 4,972 is a guy at Volkswagen Credit,” Dahm said. “I first contacted that person on July 25. I may not have spoken with him but I keep up to date with what he’s doing.”

The trend tabbed “social networking” is vastly broader than MySpace, and its components are quickly being incorporated into hundreds if not thousands of Web sites, ranging from autos to music and even shopping. The sites are defined by content—photos, product reviews and the occasional rant—that users contribute, helping to build a sense of community and participation.

Social networking represents an evolution of the Web, from a static place where people searched for news and information into more of a gigantic coffeehouse, where people gather to share their opinions and swap photos, stories and videos. It’s a shift toward participation, a two-way Web.

The evolution exploded onto public consciousness after News Corp. paid $650 million for MySpace last year. Now, Yahoo is reportedly considering a purchase of Facebook.com, a smaller MySpace rival, for about $1 billion.

That has many people wondering if such a high price for a site with less than 15 million unique visitors in August is worthwhile considering the very real possibility that another trendy site is lurking in the background.

“MySpace is worth a lot because it’s the leader in the field. They have a lot of community and a lot of users,” said J.B. Pritzker, a partner with New World Ventures, an Evanston, Ill., venture capital firm. “But if the question is, is the technology replicable, the answer is yes.

“On a financial basis, in my book, you can’t possibly justify $1 billion for Facebook,” he said.

The tools that have made MySpace and Facebook so popular are rampant across the Web.

At Boompa.com, for instance, auto enthusiasts share photos of cars, motorcycles and their motor-loving credentials in what site operators call an online garage. At Yelp.com, users post their thoughts on Chicago-area health clubs, restaurants, spas and nightclubs, among other things. And at Tripadvisor.com, users make travel plans based on reviews from customers who stayed at a city’s top hotels and ate in their restaurants.

“Trip Advisor is starting to gain some acceptance,” said Bill Tancer, general manager of global research for Hitwise, a Web tracking firm. “It now matters more to major hotel chains how many bubbles or whatever it gets on Trip Advisor than stars from AAA ratings.”

George Luhowy, a publisher of computer-related information in Boston, tracks about 425 Web sites that use some sort of social networking aspect. “That’s probably doubled in the last three months,” he said, “and there are probably less than 50 or so in our pipeline” that the company will soon add to a database it sells to institutions that monitor Web trends.

Yet despite the growth of sites that rely on user-generated content, none have the audience of MySpace or Facebook.

In August, MySpace had 55.7 million unique visitors, nearly four times the size of the 14.7 million Facebook visitors, according to figures from ComScore Media Matrix. Microsoft Corp.‘s Windows Live Spaces follows with 9.7 million users, Xanga.com has 8 million and Flikr.com, a photo site Yahoo bought last year for an undisclosed amount, has 5.5 million users.

Analyst Tim Boyd thinks Yahoo is willing to spend $1 billion for Facebook—a site originally for university and high school students but now open to anyone—because it will help the company better compete for advertising dollars.

“It makes economic sense for Yahoo,” said Boyd, who follows Yahoo for Caris & Co. “You know what kind of users you will have. They intrinsically share more information about themselves than typical Yahoo users,” making it easier to target ads to this market.

“That is the overall trend in advertising,” Boyd said. “Money is getting more targeted and smarter. It’s no longer about how wide the reach is, but shifting more toward return on investment. I think they need Facebook, they need to offer something really targeted.”

Pritzker was more direct: “It speaks to the need of Yahoo to prove to the market that it can compete with other large players in every segment. That’s how you get this outsized number” of $1 billion.

Whether or not that deal comes to fruition, few people doubt social networking is going away.

“At its core, a mass medium that brings people together to share their own content is not a flash in the pan,” said Jack Flanagan, executive vice president with Comscore Networks.

Dahm, the national accounts manager for UPP Business Systems in Downers Grove, Ill., finds social networking an extremely valuable business tool.

“I want to know where everyone is,” he said. “It’s applying networking tools onto the Internet. It’s a much more efficient use of technology.”

Jessica Nelson, 31, a Chicago consultant, agrees. A MySpace user for two years, she uses the site to build her business.

“Social networking and business go hand-in-hand these days,” she said. “I do private event management and so many people have found me through MySpace.”

On the other hand, she wonders if MySpace’s usefulness has run its course. “It’s phenomenal and has revolutionized the Internet, but it’s just getting too big and it has started to lose its added value for me.”

Nelson isn’t looking for an alternative yet, but her concern mirrors what many people believe: There’s another MySpace or Facebook out there that will emerge soon enough.

Hitwise’s Tancer calls it the “Internet laws of gravity,” where a site goes from basically zero to dominance in a relatively short period of time.

He cited YouTube.com as an example. When a skit from Saturday Night Live called “Lazy Sunday” hit YouTube shortly after it aired on NBC in December, the relatively unknown video site soared in popularity and quickly surpassed Yahoo video as the Web’s most popular domain for short clips.

“If someone is going to spend that amount of money ($1 billion for Facebook), they have to be asking themselves if someone is out there that is going to blindside them,” Tancer said.

He said it is hard to tell what that next site could be, but he called the social networking trend “very real. There’s potential applications for this in every space.”

Flanagan concurred that there isn’t a site on Comscore’s radar that is really “jumping out yet” to threaten the strength of MySpace or Facebook. But with so many sites chasing social networking, passing up $1 billion for a site that launched in February 2004 seems risky.

“I’d take the money in a second,” Flanagan said

___