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Summary:

Back in the day, you know in 1997, a company like Lycos or Yahoo (YHOO) would announce an e-commerce relationship with say Barnes and Noble or some travel site every other week. With advertising revenues scant, e-commerce deals were then seen as a quick way for […]

Back in the day, you know in 1997, a company like Lycos or Yahoo (YHOO) would announce an e-commerce relationship with say Barnes and Noble or some travel site every other week. With advertising revenues scant, e-commerce deals were then seen as a quick way for portals to boost revenues (if not profits) back then. This Bubble 1.0 flashback happened while reading this report in The Financial Times about Apple’s plans to work with Bebo and selling music through the fast growing social network in UK and Ireland.

Buried at the end of the report was this nugget:

Mobile telephone operators Vodafone and Orange have also signed deals with MySpace and Bebo, respectively, hoping to increase the use of the internet through mobile phones by encouraging social network users to access pages via their handsets. Last month Facebook, another popular networking site, unveiled plans to allow outside companies such as Amazon, the online shopping site, to embed customised features in Facebook pages.

Wow… E-Commerce is showing up on Social Nets.

Walking down the memory lane, it is easy to see some similarities between portals of 1990s and social networks of today. Social Nets face some of the same business dynamics that challenged Yahoo and Lycos. Despite high number of page views, good traction with their users, today’s social networks haven’t exactly won over the advertising establishment that controls the purse strings.

The old portals did well by selling access to the audiences (politically correct phrase we use these days: community) to folks who had something to sell. Social Networks, it seems are taking a cue from that old game plan. If used judiciously, this is actually a healthy development as it gives the social networks a decent revenue stream and makes them less reliant on the mercurial online advertising market.

The Apple-Bebo deal around iTunes and music sales, for instance passes the commonsense test. While the FT report doesn’t outline what the exact financial agreement between Bebo-and-Apple is, one can guess that there will be a tiny fraction of total sales that might flow into Bebo’s coffers.

Can we expect more such deals that match the communities with commerce in coming months? I think yes – but what do you guys think?

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  1. I think it is inevitable. The danger for social nets is that the mySpaces become adSpaces. If the extra money is used to create extra value then it’s a winner, otherwise maybe not. I also think that social nets will not be as big in five/ten years as they are right now, but streamlined, just like e-commerce sites after the big burst.

  2. Those deals, and especially not knowing the details of them, constitute of a major danger to the social network API world/model.

    What would happen if say Facebook signs EXCLUSIVE (proprietary?) deals with say Amazon and iTunes?
    Thank you guys for boosting my platform even more over the last weeks, now I show you my real face. You guys build the platform further, I cut you off the revenues you might have hoped for???

    Anyway, IMHO right now those deals are nothing more than an extended, and probably more interesting, affiliate system. In the Apple-Bebo case, the middle man (TradeDoublers?) seem to be the loser.

  3. As someone who is about to launch a social networking site that contains other features such as storing personal data (contacts, diary, internet bookmarks) online for a fee, I know how difficult it is to get any form of funding or advertising revenue. That is, at least until there are high numbers of people uptaking the service. Deals like this are a shot in the arm for the social network portal, stopping any bubble from bursting. After all, e-commerce love social networking sites as it gives them a huge customer base almost instantly!

  4. Have the telcos commented on the rates for using a heavy service like youtube.com? IMHO, what I like best about the Net is the diversity. These portal ideas are so immensly boring cause one company is never going to keep up with all the interesting things around and as usual the users of the systems have nothing to say about if they want their pages littered with ads. Maybe we are giving away our works too easily, maybe we should get in on the cut for providing youtube et. al. with the content.

  5. In terms of comparison, I think it must be kept in perspective, as its slightly comparing apples with pears.

    The portals of the late 90s grew up round a rapidly evolving search engine market, where the one of the primary functions of your afore mentioned portals was to reinforce brand loyalty, by giving customers something than just the search engine itself.

    Social Media is slightly different, and the mindset of the target audience is considerably different to those ‘browsing’ search engine portals such as Lycos or Yahoo (in the late 90s).

    From a marketing perspective – whilst the potential returns are very high, I can understand the reluctance to invest on a large scale.

  6. Social networks are already spam/ad hells. There’s a temptation to go after them just because of the traffic, but I’m not sure where anyone is getting terribly rich off them, let alone the thought of pairing e-commerce…

  7. I think commmunities and commerce are always going to be a great match … A lot of my buying decisions are made with the help of friends .. But it is just not commerce, entertainment choices are affected by friend pressure. Thus social networks are the best way to promote a movie .. If enough friends are going … I will end up seeing generic big budget hollywood summer studio blockbuster, however bad I have heard it is … Music is a natural extension … None of these deals are surprising…

    As always there is a risk of overdoing it, and doing it wrong… But then there is a huge revenue source opportunity. Google targets ads based on your history, Amazon also recommends products similarly. There is a clear opportunity to target / recommend stuff based on your friends ..

    And its all good .. Its about time these things started making money to justify their billion dollar valuations !

  8. Matt MacQueen Wednesday, June 13, 2007

    My thoughts were: It’s about time.

    If as a brand you want to have your user experience “where the people are”, strategies like this for extending popular desktop applications like iTunes make perfect sense. I’m actually shocked it took Apple this long to figure out how to extend their value into some of these teeming youth activity centers. Music seems like a logical choice, and is getting further and further atomized into new distribution channels and paradigms of interaction.

    I wanted to see a tight integration with Last.fm!

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