Blue Collar Rocket Science

This is the final paper for the Master of Communication, Digital Media program’s “Evolution and Trends in Digital Media” class, taught with enthusiasm by Ken Rufo. The assignment was to project the future of a chosen medium two, five, and ten years into the future. By the time I was finished prognosticating social networking, I’d come to feel my projections were conservative and the pace of change will likely be more rapid. I now feel we may see my ten year projections coming to pass in little more than five years. By contrast, In 1999 when I was at Disney doing a streaming media competitive analysis and making projections on the rate of adoption of broadband I was too optimistic in my assessment by about 50%. Moral: It can be hard to get the future exactly right.

Brook Ellingwood
COM 546: Evolution and Trends in Digital Media
Instructor: Dr. Kenneth Rufo
May 08, 2006

Table of Contents

• Introduction
• Social Networking and Social Network Sites
• Social Networking is not Restricted to Social Network Sites
• Social Networking as Human Extension
• Financial Background of Dedicated Social Network Sites
• Current Directions
• Current Challenges
• Predicting the Future in Three Easy Steps
• The Next Two Years: The Venture Era Continues
• Waypoint: Q2, 2011
• Impact on Other Media
• Third Party Interface and Platform Options
• Point of Sale Meets Profiles
• Two to Five Years: The Interchange Era
• Waypoint: Q2, 2014
• Impact on Other Media
• “Open Profile” Servers
• Mergers, Partnerships, and Smaller Players
• Confusion in Retail and Content
• Five to Ten Years: The Open Era
• Waypoint: Q2, 2019
• Impact on Other Media
• Social Networking 1, Business Model 0
• Conclusion
• References

Introduction

Over the past several years, social networking has distinguished itself as a significant and growing Internet activity. Much as Web content did in the early days of mainstream Internet adoption, the increasing number of participants in Internet social networking activity has attracted the attention of venture capitalists, entrepreneurs, and forward-looking non-technology business people. The manifestation of this attention has been a number of popular social networking sites.

In this paper, I will make predictions for the future development of Internet social networking as a behavior and social network sites as a class of media technologies that underly this behavior. While the predictions by themselves may not a address monetization models, I hope to provide a framework within which monetization strategies can be defined. The way points on this future path will be set at two, five, and ten years from the time of writing.

Social Networking and Social Network Sites

To understand social network sites, we first need to understand social networking behavior. Social networking is behavior in which individuals define their connections to agents, allowing interaction with them. The term “agents” is borrowed from the Friend of a Friend (FOAF) vocabulary specification, which states it may encompass individuals, groups of individuals, software, or objects (Brickley & Miller, 2007).

Although outside the scope of this paper, I believe it can be demonstrated that social networking is an inevitable by-product of the interactions made possible by the nature of the Internet. As the network was developed and new protocols were introduced for the exchange of “official” information, they also facilitated “unofficial” uses, which amounted to social networking. Email and Usenet are early examples of protocols with narrowly defined uses, but which individuals used for social networking behavior.

Social network sites are a class of Internet media, which emerged from recognition of social networking behaviors. Social network sites are specifically designed to facilitate social networking, but are driven by competition to be protective of their data, which places strict limits on the true networking ability each allows. Profiles on MySpace, Facebook, and LinkedIn are not interchangeable, nor for the most part are they interoperable, or even show an awareness of each other. As a medium, social networking is currently kept from reaching its potential by the imperatives of economic competition.

Social Networking is not Restricted to Social Network Sites

Discussing social networking as it is today, is is nearly impossible to not focus heavily on the major social networking sites. But social networking is a behavior, not a technology. These sites seek to capitalize on what people were doing already, by making it easier and more powerful.

As mentioned previously, it is my belief that in the early days of the Internet social networking became an adjunct behavior to information exchange via pre-Web protocols. These protocols have analogues today.

Although often referred to as “micro-blogging,” Twitter’s exchange of information with groups or individuals actually bears a strong resemblance to historical usage of email, even to the common practice of choosing a client that suits user preferences. The obvious difference is the limitation on the length and format of the message and ability to preemptively filter by user, yet I believe this helps Twitter fill a function email used to before too many messages led to over-full inboxes.

Blogs can be shown to resemble newsgroups, especially moderated newsgroups. The gamers have taken social networking from text-based virtual universes to rich graphical ones such as World of Warcraft. And peer-to-peer networks provide seeds around which online communities of file-sharers form, in a way that even the lowly FTP and Gopher services once did.

Directed social networking has become a part of many sites that at first glance exist for other purposes, such as commerce or self-publishing. Amazon.com’s integration of social networking into its online retail experience via customer reviews set a standard for commerce sites to follow, while user activity on YouTube goes far beyond passively watching uploaded video and includes ratings, comments, subscriptions, and more.

What social network sites seek to do is monetize what had previously been an adjunct behavior. To apply McLuhan’s “global village” metaphor to the Internet, we can imagine a central plaza ringed by businesses. These businesses benefit from the fact that everyone gathers in the plaza, creating a beneficial economic climate. In this metaphor the pure social network sites are hanging around in the plaza talking with their old friends, meeting new friends, and not spending any money at the businesses around the plaza. Perhaps they are even driving potential customers away from the businesses. The answer to the question “can social network sites make money by hanging around in the plaza chatting?” will eventually determine the future of social networking itself.

Social Networking as Human Extension

25 years ago Marshall McLuhan defined media as “any extension of ourselves” (McLuhan, 1964). Internet social network sites clearly fit this definition while the way they have integrated into the everyday pattern of many peoples’ lives takes it to a level that technologic infrastructures simply could not support until very recently.

Where a strict McLuhanist view of social networks sites proves problematic however is in McLuhan’s lack of differentiation between behavior and the technology enabling the behavior. McLuhan’s implicit assumption would be that social networking behavior is supported by a social network infrastructure, as his theories were developed in a time when mass media were defined by a common specification, whether formal like television broadcast standards, or informal like the layout and content norms of newspapers.

It’s difficult to discuss the current state of Internet social networking as a singular medium, as if Facebook, MySpace, and Twitter were merely different television networks, each offering unique programs within an otherwise similar experience. In 1964 there was little to be done to enhance the experience of television. Buying an expensive television might marginally improve the picture quality, allow you to view a rare color broadcast, or perhaps change the channel without getting out of your chair, but the fundamental experience of watching television remained the same. The technology almost completely defined the behavior. It was certainly technically possible to experience television broadcasts through radio receivers, but for a normally-sighted person, this removed the defining characteristic of television as a medium and made the experience thoroughly unrewarding.

Instead of a single specification for broadcasting audio/visual signals, what social media networking sites share now is the foundational IP and HTTP protocols. These allow for considerably more flexibility of experience than specifications for earlier media allowed. The Internet Protocol (IP) provides for addressing and routing of information between physical machine locations (Internet Engineering Task Force, 1980), while the Hypertext Transfer Protocol (HTTP) provides for structuring the information in a standardized format that can be interpreted by client software (Berners-Lee & Fischetti, 1999). Within the boundaries of HTTP, there is considerable flexibility in controlling the user experience with the client software.

While little is likely to change with the IP and HTTP protocols in the next 10 years, understanding that the Internet is a layer cake of standards resting on a platter of data exchange protocols is important. We may think first of Web browsers when we think of social networks, but they are by no means the only class of client that can interpret HTTP content sent via IP. Twitter owes some of its success to the ease of writing alternate clients for its Application Programming Interface (API), ranging from desktop computing software to installable interfaces for mobile phones. These clients attempt to improve or extend the Twitter experience in ways defined outside of Twitter’s own development process. More complex social networking experiences, such as Facebook, have yet to fully open their APIs. They have created alternate clients in-house although these clients tend to have limited functionality and platform support.

We are left then, holding a mixed bag of media, which share common underlying protocols but don’t offer the same sort of shared experience of technology that shaped McLuhan’s concept of media as both behavior and technology. The challenge of definition is further complicated in that the product contemporary social network sites pitch to users is not actually the network, but the user experience of the network.

Where television networks differentiated with content, social networks differentiate and compete by offering unique experiences, thereby creating alternative extensions of the user. The hoped-for monetization models of social networking sites place a high value on user data, which discourages sharing information broadly outside of the user experience. Although it is changing rapidly, until recently each site has been contained within a garden wall of authentication, over which only the smallest bits of information was allowed to pass.

Jockeying for users and attempts to define monetization strategies will drive changes in how social networking sites evolve. This competition may be direct, such as that between the social sites Facebook, MySpace, LinkedIn, and Friendster, or it may be tangential, such as it is between the social sites and the established social networking behavior on Amazon.com. It may only be implied, as in the open source Elgg platform and the proprietary services, but even this low grade competition affects decisions that shape how social networks as a class of media will develop.

While predicting what the outcome of this period may be is fairly straightforward, the act of researching it for this paper is not. The business news carries stories daily about Facebook and MySpace, which will be shown to be the two most significant drivers of social network usage at this time. Sources used in early drafts of the paper have been made obsolete by ongoing events. However, the broad outlines of prediction can be made with confidence, even if details change after the time of writing.

Financial Background of Dedicated Social Network Sites

In the United States, MySpace is the largest social dedicated network site, followed by Facebook. A number of other sites trail by a good distance.

Facebook use in the US is growing, while MySpace use remains relatively flat.

Illustration 1: Comparison of growth rates for U.S. users of MySpace and Facebook, Measured by Comscore (Arrington, 2009)

Worldwide monthly user numbers for the top two social networking sites are staggering, with Facebook almost twice as large as MySpace.

Facebook founder Mark Zuckerberg recently announced that Facebook’s total number of “active users” had reached 200 million (Zuckerberg, 2009). Only three months ago, when the number was 150 million, Zuckerberg observed that Facebook’s virtual population was larger than the real populations of all but seven countries (Zuckerberg, 2009). If Zuckerberg made his comparison now, only five countries would be larger (Central Intelligence Agency, 2009).

Illustration 2: Comparison of growth rates for worldwide users of MySpace and Facebook, Measured by Comscore (Arrington, 2009)

Since September, 2005, MySpace has been 100% owned by Intermix Media, Inc., which is owned by Fox Interactive Media, which is owned by News Corp. At that time, MySpace received $70 million in cash (News Corporation, 2008), on top of funding MySpace received prior to the purchase, including an earlier purchase of a 47% stake by Intermix. MySpace’s profitability is not separately reported, although press reports give a figure of $200 million revenue in 2008 (Laughlin, Cox & Segal, 2009).

By contrast, Facebook remains privately owned, and has gone through three rounds of funding totaling $40.7 million (Facebook). Recently, Facebook reportedly declined more investment money, apparently because Zuckerberg believed the valuation potential investors were using was too low and because the company has up to two years operating expenses in the bank. There is speculation Facebook may break even this year (Eldon, 2009).

Current Directions

The MySpace experience has long been defined by users sharing media content, and with the launch of MySpace Music, the company is looking to integrate sales of music downloads from Amazon.com, concert tickets, and other entertainment products into its user experience (Nakashima, 2009). At the same time, the site is facing a loss of revenue from an expiring advertising deal with Google that is unlikely to be renewed (Laughlin, et. al., 2009). Just a week before the time of this writing, co-founder and CEO Chris DeWolfe was forced out, while the other co-founder, Tom Anderson, has been removed from his existing role with no clear new role defined (Grover, 2009).

By contrast, Facebook has not looked to add revenue streams through partnerships. The company places a high premium on its relationship with its users, even to the extent that this year it has rolled back terms of service and interface changes in response to user complaints. At the current time, it has just completed allowing users to vote on the new terms of service (Harris, 2009). And, in a another indication of how fast the background information is changing, just a few hours before the time of this writing Facebook announce a new API, which will allow users’ activity streams to be reused by developers without requiring any user interaction with Facebook itself (Musil, 2009). Facebook’s newly announced API complies with the Activity Streams standard, based on the Internet Engineering Task Force’s (IETF) Atom feed standard (Cheng, 2009).

A suite of technologies referred to as “the Open Stack” is increasingly being adopted by community-focused sites. From the user perspective, the component of the stack that will be most apparent will be Open ID, which allows users a single set of credentials which may be used across multiple sites. Underlying that, an additional four standards for data discovery and exchange eases interoperability. MySpace supports the Open Stack for its MySpace Data Availability API (Hughes-Croucher, 2009). The established Windows Live ID, which provides a single sign-on service like OpenID’s, became an OpenID provider in late 2008, calling OpenID a “de facto” standard (Kincaid, 2008). Facebook’s position on OpenID is unclear, as it offers a competing service called “Facebook Connect” yet has joined the OpenID board (Ostrow, 2009).

Current Challenges

In a number of ways, the current era of social network sites greatly resembles the “dotcom” era of the 1990s. There has been considerable investment based on assumptions of future profitability, and the speculation is based on a belief that a single entity leveraged income from many small sources can prevail.

The depressed online market of 2001 and 2002 provided Google with an opportunity in the form of AdSense, or syndicated advertising targeted by page content, with profit shared between site owners and Google. Tim O’Reilly, when attempting to explain what his “Web 2.0″ coinage means, focused on Google AdSense as a way of leveraging the “long tail” of “small sites that make up the bulk of the web’s content” (O’Reilly, 2005).

This economy in which a dominant player partners with smaller players and creates a fertile business environment can also be seen in Amazon’s expansion into hosting small retail sites, even to the extent of stocking and shipping products for partners (Amazon.com). As in the 1990′s, the social network power players are fighting to be the last one standing.

What is not clear, however, is what the survivor will see when the dust of the battle clears. Is there another Google AdSense waiting over the horizon, ready to pull a new revenue model out of the smoldering embers of the old?

Predicting the Future in Three Easy Steps

Predicting the future of social networking with two, five, and 10 year way points gives us three periods in which different factors have the most impact on social networking sites. The three periods I have identified are as follows:

The Venture Era. Over the next two years, developments in social media will continue to be largely driven by active competition to define the space and maximize profits to investors.

The Interchange Era. As the competitive landscape becomes settled, partnerships will form, and social network sites will be entirely recast as social networking services.

The Open Era. Social networking will become indistinguishable from most other Internet behaviors. Will the social networking business model survive the asteroid strike?

The Next Two Years: The Venture Era Continues

Waypoint: Q2, 2011

Two years from today, in the second quarter of calendar 2011, the term “social networking site” will be increasing superseded by the concept of “social networking service,” as many active users of Facebook, Ning, LinkedIn, and many other current social networking sites will only visit them for purely administrative tasks. Although the experience of activity feeds will be exported to third party clients, easy aggregation of activity feeds from multiple services will intentionally be made difficult by competing services. Many social networking experiences will incorporate ecommerce in increasingly effective ways, and smaller ecommerce sites will experience declining visitations and sales. A high valuation placed on the limited number of retail placement deals in activity feeds will fuel an economic boom amongst third party experience providers. MySpace will only be a partial participant in the services-oriented ecosystem, and thus will see a continuing decrease in active users even as its revenue increases due to high placement fees paid by online retailers.

Impact on Other Media

Social network sites will continue to grow in usage across the world until the point of ubiquity in “connected” demographics.

Broadcast media which already has turned to social media to enhance user experience by offering bonus content online and facilitating custom social network sites, will use social networking to a greater and greater extent.

Newspapers, having failed to support legacy operations by attempting to monetize articles as blog postings, will increasingly add social networking experiences into their Web sites. They will resist open technologies, such as OpenID, which will hurt them as many customers will come to see managing multiple logins as a hurdle they choose not to leap.

Third Party Interface and Platform Options

By supporting the Activity Streams standard, Facebook has given an additional boost to the trend towards openness. Within the year, all major social networking sites will support open standards or begin what will eventually become fatal drops in active users. These technologies will begin a further break down of the “walled garden” effect of current social networking sites.

For the time users will have a choice of interface, instead of only using the one offered by the social networking site itself. Developers will provide a flood of options for experiencing social network activity on any imaginable platform. Over time, the best implementations will be attract large numbers of users. Conversely, some potential benefits to Facebook users in particular may be unfulfilled, as the company tries to avoid a repeat of the backlash to its Terms of Service update, which would have given the company more protection in issues arising from use of the API by third parties.

Existing aggregator sites like FriendFeed will continue to have a relatively small number of users compared to the dedicated social networking sites.

Point of Sale Meets Profiles

MySpace, driven by the pressure of being part of the News Corp. conglomerate, will focus more heavily and more obviously on mixing direct ecommerce into user activity streams and in the process become less of a social networking site in the perceptions of users. However, the direction they take will make it easier for other sites to implement more subtle ecommerce utility without disrupting the perceived authenticity of the social networking.

Two to Five Years: The Interchange Era

Waypoint: Q2, 2014

Five years from today, social networking will have become firmly embedded in most online activity, and will be moving from an adjunct role in broadcast and print media to a position in which it becomes a main driver of content. The “walled garden” experience that most users associate with social networking today will be giving way to mashups and custom user experiences. The face of online retail will be changing from a focus on standalone storefront sites to providing contextually appropriate feeds for mashups, and shopping cart and checkout activities will frequently happen without leaving the social media context and going to the retail Web site.

Impact on Other Media

An increasing number of broadcast programs will more closely resemble packaged summaries of the activity on targeted social networking sites, than they will traditional programs. Similarly, the surviving print newspapers will be publishing content that was created for, and in, a social networking context.

“Open Profile” Servers

As part of the increasing adopting of Semantic Web standards, some version of an Open Profile data format will be promoted by major players that aren’t strictly focused on social networking, such as Google and Amazon.com. Similar to OpenID, it will let anyone publish user profiles that can be consumed by all who follow the specification’s authentication protocols. With major player support, the social networking sites will be pressured to both consume and publish Open Profiles.

Mergers, Partnerships, and Smaller Players

As investors in smaller social networking sites see the profit made from commerce relationships by larger sites and third parties experience providers, the pressure to maximize tThe return on their investment will fuel a series of mergers. One plausible scenario would be for LinkedIn, currently a standalone site with a focus on business relationships, to merge its data with Facebook’s, and LinkedIn.com to continue its existence as a little more than a skin on a subset of Facebook data. Similar mergers would continue throughout 2011 and 2012, and will result in two or three meta social networking service providers.

Paradoxically, as the “old growth” sites go away, smaller services with less venture capital funding and deeper roots in niche online communities, such as open source development or gaming will begin filling the void. These sites will initially be aggregators, relying on tying together user information from multiple sources via the Open Stack and APIs, then augmenting it with custom features serving the site’s particular community interest. Soon, however, they will evolve in complexity and the roles will reverse: The niche community sites will increasingly feed activity data into meta social networking services rather than primarily consume it. Ning, which currently offers a robust community platform service for free, will remain independent, while providing users with API hooks into social networking services.

With Open Profiles, it will become much easier to create social network mashups. Activity and connection information can be combined with other data sources to make new user experiences. Aggragator sites like FriendFeed will expand their utility with new data sources. API combination kits, similar to today’s Google Pipes, but with a lower technical knowledge threshold will make it possible for power users to create their own mashups quickly and easily.

Confusion in Retail and Content

As social networking increasingly offers direct contextual access to ecommerce and entertainment or news content, retailers and content creators will find themselves reassessing the roles of their standalone sites. Many will choose to de-emphasize their sites, scaling back operations and moving content or transactions into contextual widgets on various social network clients. Others will move to adopt the open standards that have led to the spread of smaller social networking services, and become social networking services themselves. Still others, faced with the reality that maintaining dedicated media departments is outside their core competencies, will outsource: Many retail sites will move to Amazon.com storefronts, leveraging the existing work in social networking that has fueled Amazon’s success.

Five to Ten Years: The Open Era

Waypoint: Q2, 2019

Fulfilling the early social promise of the pre-Web internet protocols, most online activity again will be in a person-to-person context, in which person-to-machine activity such as content consumption and retail will be embedded rather than primary.

Impact on Other Media

The majority of broadcast and periodical print media will rely on social networking to drive content. It will be possible for groups of people to form and create television shows although none of them have any direct connections to the industry. Most regional newspapers will have ceased print operations altogether.

Social Networking 1, Business Model 0

The significant social networking sites of today will all have been acquired by players with a broader focus or will be operating at a reduced scale, providing services to partners in content or retail. With Open Profiles making social networking a ubiquitous context online, the only business value to social networking will be in combining it with other activities.

Conclusion

The direction of social networking is in many ways presaged by the history of the Internet, and the social interactions inherent in many pre-Web protocols. With the benefit of hindsight, it can be seen that introduction of the Web enabled a period in which many online interactions ceased to be in the person-to-person context. This first manifested itself in online published content, which took the form of machine-to-person in the same way that interactions through print are mediated by the agency of the printing press. Swiftly following content, online retail also established a machine-to-person model of interaction.

Almost as soon as these non-social modes of interaction were established, they began to evolve in a social direction. The typical content model developed towards blog posts with comments, while retailers soon added socially-driven features like profiles, comments, and wish lists.

With the launch of Friendster in 2003, the era of social networking for the sake of social networking began. While this period has driven significant technical innovation and demonstrated the enormous appetite for social networking, it has also highlighted challenges with the problem of monetizing social networking activity in a pure context, as well as the frustration of walled gardens of data that are kept from interoperability due to financial competion.

The purchase of MySpace by News Corp will be seen as the beginning of the integrated social network era, when social networking competencies will be brought in from the outside and used to provide a social text to previously non-social activities. At the same time pressure from companies that benefit from open information such as Google, as well as influential thinkers promoting open standards, has begun opening cracks in the walls of the social networking sites’ gardens.

As businesses in online and other media wrestle with how to maintain competition by putting their product in a social context, there will be more openness and exchange. This will undercut the business potential of pure social networking sites. Eventually, social networking will become simply the context within which virtually all online activity takes place.

Ten years from today, the wired demographic will be living in McLuhan’s “global village.” The next great step in the process will be the time when everyone on Earth joins that demographic.

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