The Coming Consolidation in Social Networking

Social media sites are multiplying like rabbits. A while back, I posted the Alexa rankings for 42 popular Web 2.0 social tagging sites. Later, I wrote about a couple more, and newer sites such as Twitter keep popping up. Wikipedia lists more than 100 social networking sites, and Social Media Trader recently compiled an even more exhaustive list of 115 social news and bookmark sites rated by PageRank, number of inbound links and dollar value of each site.

Inevitably, there will be a shakeout and consolidation of this space. As Paul Dunay points out, the explosion of social media sites has spawned its own acronym: YASN (Yet Another Social Network). Over time, virtually all markets consolidate around three major players (for example, Google, Yahoo and MSN in search) plus a few wannabes (e.g. Ask, AOL) and a number of niche sites (Mahalo). There simply isn't enough traffic to support 100+ social media sites, although "social media" is defining the market a bit too broadly. Two to three leaders are likely to emerge within each segment of social media, such as tagging/bookmarking (e.g., del.icio.us, Digg, Furl, Backflip), community (MySpace, Searchles), networking (LinkedIn, Facebook), etc.

The leaders will garner high amounts of traffic appealing to a wide market. The sites that fail to make it to the elite level will likely need to specialize as niche players in order to survive—sacrificing traffic quantity for focused traffic quality. The strategy will probably be to focus around affinity groups: these could be based on demographics, location, hobbies, religion, political affiliation, professional interest or any of a number of other categories. For example, B2B buyers and vendors are unlikely to want to congregate on the same sites where tweenagers are babbling about Hannah Montana, and kids could care less about developments in database technology or network appliances.

At least a few social media sites have already taken this route, such as BeeTooBee in B2B marketing and DZone for software developers. The existing generalists who fail to make it into the top tier will either need to identify underserved niches or provide compelling differentiating features to lure traffic away from incumbent specialty sites.

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Contact Mike Bannan: mike@digitalrdm.com

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