Social Networking Platforms Tempting Investors

Today, Reuters published an interesting article "Social Network Sites Tempt Investors"  talking about the liklihood of a flury of social networking IPOs.  The article is well worth a read for all of you social media fans out there.  According to the article, so called "Wall Street observers" believe that United Online Inc.'s recent registration for an IPO of its Classmates Media Corp. arm (i.e. Classmates.com) will  "test the IPO waters" for other social  networking sites like Facebook and LinkedIn.

While I believe that the remainder of 2007 and early 2008 will bring more social networking IPOs than we've seen so far (not many), I don't believe that Classmates.com will be an accurate indicator of the success of future social networking IPOs.   Even if Classmates.com's IPO bombs, Facebook, LinkedIn IPO, and Bebo IPO have a strong liklihood of being successful IPOs.  To have a solid IPO, a social networking company will have to do more than just link people socially.  It will need to be a platform for relevancy, discovery, sharing, and search. 

When Google IPOed, it was successful, not just because it enabled search, but it provided a platform that wove together search, information, email, and more with relevant and targeted advertising.  Facebook will succeed with an IPO not because it is a social networking site but because it is a social networking platform that allows 3rd party developers to plug-in and users to benefit.  In other words, it is, in effect, a social media operating system.  LinkedIn and Bebo will have successful IPOs if they continue to grow their user base, expand their platform capabilities, and quickly develop a useful API for 3rd party developers.  However, to be clear, it will take a lot of effort, great skills, good timing, (and, perhaps, a miracle) for either Bebo or LinkedIn to have a more successful IPO than Facebook.

By engaging 3rd party developers so early, Facebook gained a clear lead over the competition, which will be hard for competitors to surpass.  By creating a social networking operating system, which allows entreprenurial developers to plug in, contribute to, and profit from a wider economy, Facebook has peaked the interests of investors - not only as a company in which to invest but as an economy in which to invest.  As I mentioned in my last post, VCs are expressing a strong interest in the players within the facebook 3rd party developer economy, and is easy to see why.  Facebook is creating a social media operating system that has the potential to revolutionize the web by changing the way people find and interact with content and applications.

Yesterday, Robert Scoble posted an interesting video trilogy on his blog in which he predicts that if they work together, Facebook,  Mahalo, and Techmeme will trounce Google in 4 years by providing superior SEO-free, reduced-noise, social search that does more than Google.  While I'd be seriously surprised if Google didn't have something up its sleeve to compete with the vision Scoble outlines and I don't think we'll see the end of SEO, I do think Scoble makes some good points in his vlogs.  His musings on the topic of social networking, social media, and search highlight a growing interest in social networking as a space and its potential to change the way we surf the net.
 

There is nothing more attractive to investors than strong possibilities and good ideas, and it's clear in the quickly growing and evolving space of social networking, there is a high concentration of both.  Which social networking companies will choose to ride the wave with an IPO remains to be seen, but I'm betting with Reuters in thinking the numbers will increase very soon.

Note: I'm not an investment advisor, and my blog posts do not constitute financial advice.