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by Nathan Egan
on July 28, 2010

Is the innovation race over for social media?

In his excellent piece “What has happened to all the new social networks?” Arthur Monday writes that the rate of rapid social start-ups is probably on the wane:

Despite the insistence of web executives everywhere that rivals online are “only a click away”, you actually have to screw up royally to turn a successful service into one that people leave in droves (So congratulations to the former managers at MySpace and Bebo: you deserve your place in those MBA case studies of the future.)

Look around, though, and sites such as blip.fm haven’t taken off. True, services such as FourSquare and Gowalla seem to be on the rise – although, as Leo Hickman pointed out last week, people haven’t quite grasped the threat that they can pose to users. So we’re back at the original questions: where are all the new social networks? I think they’re gone. Done, dusted, over. I don’t think anyone is going to build a social network from scratch whose only purpose is to connect people. We’ve got Facebook (personal), LinkedIn (business) and Twitter (SMS-length for mobile).

And throw in YouTube for good measure!

Are all the social media bases really covered? I tend to agree and here’s why. If you look at classic market dynamics, there are usually three large companies who dominate a market and then a few niche players. Think about almost any traditional industry and consolidation occurs over time to leave a market leader, a close second and an innovating third player. Soft drinks — Coke, Pepsi, Dr Pepper and the niche players. U.S. beer market — A-B, Miller, Coors and niche players. Rental cars — Hertz, Avis, Budget and niche. The examples can go on and on.

But consumers seem to be

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able to attach their emotional loyalty to ONE player per social market. That’s why the business strategy has been so different for the social business start-ups. It’s not differentiate or die, it’s scale or die.

Once the checkered flag waves for the location-based apps race, radical innovation and new players on the social scene may be over.

To a great degree the new functionality of smart phones drove the adoption of social networks, especially the location apps like Foursquare. Hardware (3D capability) is also driving the latest innovations in entertainment and gaming. It may take another breakthrough on the mobile hardware side before we see the scope of software innovations like we’ve seen on social networks over the past five years.

Agree?