Investors, please do not try building another Facebook!

During the Worldwide recession the lotteries jackpots are still huge therefore people winning them still need to invest few million of dollars or euros or any other currency to some business Internet business is still one of the most attractive directions of investment. Now it is very difficult to create a competitive and successful e-shop, web design studio, online project management service or any other affiliation site because of huge competition. Some entrepreneurs still try to create social networks like Facebook, MySpace, Bebo, but majority fails. Does that mean that no one can repeat the success of Twitter or Facebook which started with very little budgets? Probably not, but only 1 of 100 attempts may succeed.

What about bigger chance of success? Let’s see what big social networks offer to people:

* Lots of contacts to choose from different countries, speaking different languages;
* Lots of interests to discuss using social networking tools such as micro-blogging, groups, forums, social bookmarking, file share etc.
* Unified communication features for all members;
* Generic forms of marketing and ads;
* Possibilities of using third parties applications (widgets) to satisfy specific needs.

When people have general interests in communication with people worldwide in own and general language huge social networks are the best solution. No one can beat Facebook or MySpace in traffic as they satisfy this communication thirst. However still remains the need for communication in local circle. Example is Hyves.nl social network in the Netherlands, which is more popular than Facebook or MySpace. There is a short presentation illustrating the local networks versus Facebook and MySpace usage.

The newest hype of WWW is Twitter – the simple micro-blogging platform with lots of the additional services around. Twitter is huge, but that is not going to last forever because of Twitter clones. Someone counted more than 200 of Twitter-like sites in different countries. That shows the power of the locally based similar services to giant social networks. If someone has a spare million of dollars, he/she should think about creating a local social network in some country or region (example of regional social networking success is Netlog.com – one of the most popular Social networks in Europe). Of course there is almost no market without competition (I doubt there is big market in Zimbabwe where people do not have electricity, not speaking about computers and internet), so it is good to analyze the market first.

If we look at the social networks list we can clearly see another interesting criteria – the interest based social networking. That’s the main competitor of big social networks, as they cannot provide the interface for every interest. All they can do is allowing third party widgets to be installed making the profile and management of the personal space messy and troublesome (look at the MySpace profiles). The interest based social network can be international; therefore it can be easily tested on some local markets first and then launched internationally. That makes management of investment easier and more effective.

What can be the main interests of people to be transferred to virtual space in the shape of social network with friends ties, status updates, blogging, picture, video exchange, bookmarking features, groups and chats etc.? Classmates, dating, blogging, job search are the main ones attracting huge amount of people, but still there are some other areas.

Let’s review it personally. I have a Russian Blue cat so I participate in such social network for cat lovers as UnitedCats.com (by local country, of course). If I would like to leave this network I would choose a brand new CuteAsHell social network for pets in general. Why I like this social network instead of Facebook Russian Blue Cats Group with almost 300 members? Because it has very nice features for cat lovers such as virtual gifts (all kinds of kitty toys and equipment what makes this gift feature unique), photo voting is called “Pat the cat”, blog can be written on behalf a cat or owner which make really interesting to read. Also I know that some of the participants of this community are professional cat breeders which can really give me help if my cat gets sick or I do not understand her character. Neither Facebook or MySpace cannot give me that.

I travel a little, therefore I participate in travelers social network WYAN.com where people share their reviews about countries, tours, day trips and of course shares pictures of the places of interest. I can easily make decision where to go and what to see. I always can share my plans and can even make some friends in that country to meet them once I arrive and hear another story about the country rather than tour guides tell. Probably I will have lots of troubles looking for similar information in Facebook and Myspace.

As a professional I have my profile in LinkedIn and participate in local professionals discussions as well as global ones. Here I can share my professionalism, participate in discussions about specific work related issues. Here I can find another job, or find the entrepreneurs for my business plan. Have you ever seen people who are hosting their resumes and CV in Facebook or MySpace? I have not.

As you can see the interest social networks are very good for sharing the personal interests and setting the communication among people with similar interest. In Facebook I always see my friends speaking about the things I am not interested or even do not understand (hear programmers speaking – if you are not in IT market their language will be like gibberish). In the interest social network I will always understand what my peers are talking about.

Investor should think if there are any interests which are covered quite poorly. For example pet social network market is quite saturated as some serious people made some investment. But maybe bikers’ social network still would make a nice ROI? There are always some profitable markets uniting golfers, cooking lovers, photographs, poker players etc. which must be investigated and some competitive social networks with unique tools created. Technologically it is not very difficult as there are so many open source systems with huge social networking add-ons collections.

Another important feature of new social media should be a flexibility to adopt new trends in case some phenomena like Twitter emerges in next couple of years. Status updates are so popular (like SMS in Mobile world), that every social network must have this feature and in some cases it must be better developed to fit the needs of specific interest. For example poker players community enjoy the icons of cards speaking about their hands, however Twitter cannot have any icons. So maybe poker related Twitter clone FTsweat could provide such feature? Very big attention must be paid for internal messaging system as it may become very powerful communication and marketing tool. Look at the MySpace example. They have 125 million of active internal messaging system users and once they will build a webmail service they will automatically become 3rd largest email provider in the World. Interest based social network may never do better email service as Yahoo or Gmail, but some handy features can keep some members using internal mail outside the social network space.

Creating social network is not enough. Every social network should have additional applications for third party websites – widgets and apps for iPhones and G-phones and all the rest new type of mobile devices allowing not to use computer for communication. Without them every social network is doomed sooner or later. But let’s leave this topic for future.

Summing up. If you are an investor, please consider creating local or quite narrow interest based social network in order to kick Facebook’s and MySpace’s ass. That’s not impossible. That’s better than wasting money creating one more Facebook or MySpace.

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