Social Internet Sites - Mile Wide and Inch Deep?

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An interesting study raises the specter of the “Pareto Principle” when it comes to how truly pervasive social sites are among users.

We hear things like there are 200 million people on Facebook. You read how people are twittering all over the place and you marvel at how the internet facilitates the “inter-connectedness” among like-minded groups and across national boundaries. There is also a Census Study which shows that internet household penetration has reached 62% in the USA with the highest concentration, average about 70%, with household heads between 25 – 55 years old.

Put all this together and you see an incredible future for social sites – or maybe not.

A Harvard B Schools Study on Twitter usage patterns reveals some interesting – maybe shocking – data on just how pervasive these sites are:

“At the same time there is a small contingent of users who are very active. Specifically, the top 10% of prolific Twitter users accounted for over 90% of tweets. On a typical online social network, the top 10% of users account for 30% of all production.”

This is in line with what I have seen among forum usage patterns, where a small number of users account for the largest share of traffic. While the Harvard Study is particular to Twitter, it is revealing that the “…median number of lifetime tweets per user is one.”

That’s right – one per user. This indicates that most users are trying out the site and dropping out – hardly a stunning endorsement for Twitter’s business model.

The Pareto Principle (or the “80-20 rule”) has held true for a variety of events. You start to wonder about other social networkng sites and how deep users commit to them. There is no doubt that typically a small number of users account for disproportionate usage. The implication for business models among these sites is that perhaps there is no business model that works under these traffic patterns.

There has been a fair amount of discussion about how Twitter will make money. Currently it is not making any money and exists on its venture funding – not a long-term viable business model. Other social networking sites find themselves in similar situations. The answer to date goes along the lines of “We’ll build the service and traffic first and later figure out how to make money”.

Excuse me?

Maybe I’m old school, but it used to be that first you figured out how to make money with a business and then designed and delivered the product. Obviously the vagaries of the market changed the plan, but you started with some notion of a revenue model. My experience with start-ups has been the reverse just does not work – or maybe rarely works. The engineering model for business development (build the widget and the market will find me) is a recipe for losing money.

Add to this that usage patterns reveal a business with users a mile wide and an inch deep and you wonder if Twitter and perhaps some other social sites are destined for failure.

Anybody want to buy a tulip bulb?

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