As a longtime Skype user who never felt that the service fit with eBay, I was thrilled to hear that it’s being spun off. And now I have some thoughts on how it can quickly and easily become an equally successful social network.

In some respects, Skype already is the world’s largest social network, with hundreds of millions of users. And as a peer-to-peer system that generates revenue primarily through outbound phone minutes, Skype doesn’t need to sell advertising, which means that it doesn’t need to infringe on users’ privacy by turning their personal information into a salable commodity for advertisers — in my mind the fundamental flaw of web-based social networks. In other words, Skype has in place a well-established foundation for a social networking system based on privacy and trust. So what might a social Skype look like?

Skype already has a great client for real-time communication: a social graph of people its users know and call. It’s available for every major platform, and given Skype’s popularity, there are a large number of people online at any one time. Each Skype client could serve a XML file with the user’s current status, media files, link feeds and so forth, and to obtain a real-time view of what’s happening with other users, it could call around to folks in a user’s Skype list to get the latest updates. Such a system could be highly decentralized, with most content served directly from one user to another, and largely self-hosted, which means the infrastructure costs would be much lower than a centrally run web service.

The user experience would be effortless. Users would simply see more social features appear in upgrades to the Skype client, with, for example, Twitter-like functionality to broadcast to friends and followers in one panel, a link/news-sharing interface in another. By moving this functionality into the client, apart from a caching mechanism to temporarily store content for users while they’re offline, the need for a centralized web-based infrastructure is greatly reduced.

Apart from poking Facebook in the eye, why should Skype become a social network? Because it would drive phone minutes and SMS messages between friends, which drives revenues — which makes it a smart business decision. Besides, I’ve never bought the idea that a dominant position in a market guarantees long-term success. Skype took out a whole slew of early VoIP networks to become the world’s phone company — it could quickly and easily become the world’s social network, too.

LinkedIn, the business social network, hopped on the platform bandwagon this time last year by opening up its network to developers. It was a move I was excited to see Reid Hoffman’s crew make. LinkedIn, unlike some of the other professional networks that came before it, is actually very useful. It’s a great way to reach people within large companies, and an even better tool for recruiting and finding like-minded business people. Any extension of such a platform, therefore, was great news in my book. So how has it fared thus far?

Let me put it this way: The LinkedIn platform is no different than the Florida real estate market — neither have any building going on. And that is why it gets a solid D from me. D is for disappointing, by the way.

LinkedIn opened up its platform using Open Social and called the effort InApps. (It remains in beta.) It had half a dozen partners, among them SlideShare, Box.net, Tripit and SimplyHired.

How many new partners have launched apps on LinkedIn since then? How about none! And how many apps are there? I just counted again — there are eight approved apps on the web. Eight. And no, that doesn’t include the ones made by LinkedIn itself, including the recently launched SAP Community Connection. A new Twitter-focused app tentatively called TweetIn is likely to make its debut soon. The only other two major developments that I have seen are partnerships with BusinessWeek and The New York Times.

From what I hear, third-party developers have had a tough time working with LinkedIn; an inability to link to the company’s data set is a big issue, according to my sources. The moribund nature of the LinkedIn platform should be a warning to every single developer out there: For companies, sometimes opening up a platform is little more than an easy way to get cheap press.

LinkedIn is looking to make some changes. Last month, when it announced that it had 50 million professionals on its network, our friend Marshall Kirkpatrick quipped that it was still a roach motel. In response, Adam Nash, VP of search & platform products at LinkedIn, left a comment saying: “I think you’ll be quite happy with our plans for improvements to our APIs. Stay tuned.”

Apparently those plans include the recent poaching of Paul Lindner from Hi5, a social network that’s going through an identity crisis of its own. Lindner is a contributor to Apache Shindig, the OpenSocial back end used by everyone except MySpace.

To me, what’s most incredulous about LinkedIn’s open platform fail is that it’s all taken place under the leadership of CEO Jeff Weiner, who was one of the key proponents of social search when he was at Yahoo (back when Yahoo still had search). Even then, he was open to the notion of open platforms and social networks — in other words, he had the right ideas. With LinkedIn, he had the right platform. Too bad the company hasn’t been able to make it truly social.

U.S. web users tripled the amount of time they spent on social networks in August from the same month last year, according to Nielsen. And advertisers took note — estimated online advertising spending on social networks more than doubled over the same period.

Around 17 percent of all time spent on the web in August in the U.S. was on social networks, up from 6 percent during the same period a year ago, suggesting that sites like Twitter and Facebook have not only grown their audience size, but augmented user engagement. Meanwhile, advertising on social networks rose to $108 million last month from $49 million in August of 2008, an increase of 119 percent.

In the meantime, Facebook’s sale of self-serve ads has helped the social network become cash-flow positive, something to which Twitter — which doesn’t generate any significant revenue despite now being valued at $1 billion — may want to pay attention. A report from research firm Interpret found that Twitter users are twice as likely to click on advertisements or sponsors than people who belong to MySpace and Facebook. But while the San Francisco-based micromessaging site recently changed its terms of service to allow advertising, co-founder Biz Stone said earlier this week that Twitter won’t put ads on the site this year.

Social networks have been copying from one another for years, but the updates that Facebook, Twitter and Ning announced yesterday took such mimicry to new heights. At this point, however, dominance of the space ultimately depends on user base size. And from that perspective, Facebook, with its more than 220 million registered users, has already taken the crown.

In the meantime, here’s a rundown of the updates each site released:

Facebook — The social network now lets people tag friends in their status updates using the @ symbol, which closely resembles the “@ reply” function popular on Twitter (We predicted Facebook would make this move back in June.) The social network also said it was open sourcing Tornado, the web server framework that powers FriendFeed — essentially using FriendFeed’s technology to mimic Twitter. The release of the open-source web server framework is intended to enable developers to build applications that let users publish their status updates in real time.

Twitter — The micromessaging site modified its terms of service, including opening the door for advertisements on its platform. In doing so, it’s taking a page from Facebook’s playbook, since advertising is the current business model the social network uses. Twitter Co-Founder Biz Stone also wrote in a blog post that Twitter “is allowed to ‘use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute’ your tweets because that’s what we do.” Likewise, Facebook stores all user data in its servers, which has previously gotten the social network into trouble.

Ning — The company, which lets people create their own social networks, launched an application platform for developers and subsequently released more than 90 apps on its network. The platform lets Ning’s network creators add apps to their sites. Though Facebook apps are aimed at users, Ning is adopting a feature that’s been a part of Facebook’s platform since 2007.

Facebook has been in hot water with Canada over how it protects user data, and the country’s privacy commissioner, Jennifer Stoddart, is set to announce at a news conference tomorrow that the company plans to comply with the government’s privacy concerns. Last month, Stoddart said that the social network breached Canada’s privacy law by holding onto users’ information even after they deactivated their accounts. She also cited concerns with Facebook’s default privacy settings and asked whether the company shares user data with third-party application developers.

This isn’t the first time governments have raised these privacy concerns to Facebook. The UK government last year grilled Facebook on whether or not it stores user data on its computers, even after users deactivate their accounts, and the European Commission in June said it may implement tighter regulations with how web sites share user data with third-party app developers. Facebook recently said it’s testing a series of changes to its privacy settings so users will be better able to control what information they share and with whom.

Facebook also has had run-ins with its users over how it keeps their data private, particularly with Beacon. This summer, people expressed widespread concern on the web over questions of whether Facebook gave user data to third-party ad networks. Though Facebook is nearing its fifth birthday, it seems the social network still hasn’t been able to get its privacy policies right, and regulators will likely crack down on it more in the future.

Social networks and mobile phones are a match made in heaven. Om has written previously about how mobile carriers are reaping financial benefits from the growing usage of social networks on cell phones — more people are signing up for data plans to use apps like Facebook. Even Google and T-Mobile have taken notice; the two companies are whipping up ways to make people’s mobile experiences more social. But handset makers and carriers have a long way to go in accomplishing that task, as only 2.3 percent of Europeans visit social networks via their mobile phones, according to a Forrester Research report released today. To boost that percentage, cell phone makers and social networks need to partner to design devices tailored for social networking, Forrester analyst Ian Fogg argues.

In the report, Fogg lists five ways in which handset makers can design devices that encourage  people to consume social networks via their mobile phones:

• Improve cameras on mobile phones so users can take quality photos and immediately push them out to social networks.
• Provide better filtering capabilities that separate email from social-network messages and alert users when they receive notifications.
• Make mobile phone screen sizes larger so consumers can easily glance at information.
• Develop address books that store contact information from social networks (echoing what Google VP of Engineering Andy Rubin told Om last month at a T-Mobile event).
• Have the ability to sync and work offline so people can access social networks even when they’re not connected to the web.

These design recommendations sound pretty obvious, but as Fogg points out, many smartphones on the market lack them. As an example, Fogg singles out the iPhone camera and how it takes poor pictures in dark areas because it doesn’t have a flash. Device makers can look to INQ Mobile’s Facebook-focused INQ1 handset as a beacon, since 65 percent of INQ1 users access Facebook on a daily basis. As Om pointed out earlier, it’s in the best interest of handset makers and mobile carriers to marry smartphones with social networks because “like email and instant messaging, Facebook (and soon Twitter) are what we use to stay in touch with our friends, colleagues and family.” Social networks are indeed the communication tools we’ll continue to rely on in the future, and handsets will have to be tailored to accommodate this — or risk becoming irrelevant in the fast-changing mobile phone market.

Traffiq, whose online advertising marketplace connects buyers and sellers of online media, said today that it’s received $10 million in Series B funding. The round was led Grotech Ventures and Greenhill SAVP, with existing investor Court Square Ventures also participating.

New York-based Traffiq’s funding comes amid forecasts of a rebound in online ad spending. IDC reported today that worldwide spending on online advertising contracted 5 percent in the second quarter, but the research firm expects to see signs of growth starting in mid-2010. Private equity firm Veronis Suhler Stevenson issued an even more aggressive forecast last week, one that has U.S. online ad spend rising 9.2 percent to $23.8 billion this year. And when it comes to the rapidly growing social network space, eMarketer said last month that while it expects U.S. ad spending there to drop 3 percent to $1.1 billion in 2009, it sees it rebounding in 2010, to $1.3 billion, and rising to $1.4 billion in 2014.

But in the meantime, application developers like Slide have had to refocus their revenue efforts on higher-margin premium advertising. As the pool of app developers expands, so does the competition to get advertisers’ attention and secure advertising deals, putting downward pressure on the dollar size of the deals being made. So for the time being, app developers for social networks will still have to deal with the problem of plenty.

Updated: Yahoo has confirmed that it is indeed buying Xoopit.

Yahoo, the No. 1 email company, is rumored to be buying San Francisco-based startup Xoopit for about $20 million. While the Wall Street Journal says that negotiations are continuing, Kara Swisher says it’s a done deal. The company has raised about $6.5 million from investors such as Accel Partners and Foundation Capital.

The exit price tells us two things: When it comes to buying startups, we are firmly in a buyer’s market. And secondly, Xoopit has struggled to overcome its big challenge, that of getting more subscribers. If it more subscribers, it would have been accorded a higher sticker price. That said, getting acquired by Yahoo would be an amazing achievement for the Xoopit team, whom I’ve gotten to know pretty closely.

Following a column I wrote for Business 2.0 on the challenges of email and how to fix them, Xoopit co-founder Bijan Marashi got in touch with me and well, it didn’t take me long to fall in love with the company’s idea: turning the email inbox into a social network by organizing email-attached media (videos, photos) smartly and using the address book as an underpinning for a personalized social network.

It was so simple but it masked massive technological challenges. Still, it was clear to me that this team of ex-Inktomi and TellMe engineers was going to build a great service. Of course, getting people to use that service would be a massive challenge as well. Nevertheless, the potential of Xoopit is what excited me. Here is what I wrote back in March 2008:

As I have argued time and time again, the inbox and the mobile address book are two natural social environments. It’s heartening to see innovators trying to capitalize on simple common sense. Of course, it’s even more delicious that giants who own our inboxes — Google, Yahoo, Microsoft and AOL — are simply twiddling their thumbs.

Google and AOL are still twiddling their thumbs, even though Google Labs for Gmail has brought forward some interesting add-ons. Yahoo in particular has been a ship of fools when it comes to leveraging its email domination. Case in point: the company’s launch of the dumb-as-a-broken-brick idea called Mash, which like many of Yahoo’s attempt’s at social networking went nowhere.

I think that with this deal, however, Yahoo is playing to its strengths. (Read: Yahoo’s Number Ones, So Much More Than Search.) Using Xoopit to offer its email customers a social inbox would allow Yahoo to offer better-matched and highly contextual advertising. My biggest fear is that like in the past, it would take forever for Yahoo to integrate this service and that it would once again blow a big opportunity. Remember how long it took the company to integrate OddPost? And I have yet to see any of Zimbra’s cool features being offered on Yahoo Mail.

That said, buying Xoopit would mean Yahoo is finally adding some new, smart people to its team. The Sunnyvale, Calif.-based web company has been losing talent at a fairly rapid clip. Technically, since Yahoo owned Inktomi, Bijan is rejoining Yahoo.

To Recap: Buying Xoopit is a good and solid move by Yahoo. With it comes a talented team, a solid product and finally the ability to flex its muscles and leverage its email domination.

The folks over at MySpace sure have a lot on their plate, and the pressure is mounting. It’s no secret that the News Corp.-owned social network is playing catch-up with Facebook’s rising traffic, and the expiration date on its advertising deal with Google is looming. Now, in addition, U.S. advertising spending on MySpace is expected to fall 15 percent in 2009 to $495 million, The Wall Street Journal reports, citing a study from research firm eMarketer.

News Corp. chief Rupert Murdoch, MySpace CEO Owen Van Natta, and the rest of the MySpace team better start making headway with their turnaround strategy for the social network — and fast, or falling behind in traffic won’t be its only Facebook-related worry. U.S. ad spending on Facebook is expected to rise 9 percent to $230 million in 2009, and the Palo Alto, Calif.-based company is on track to exceed MySpace in advertising dollars by 2011, according to the Journal. Though Van Natta has been shaking things up at MySpace with a series of layoffs in the U.S. and abroad, it’s going to take more than downsizing to help the floundering social network regain the status it once held — if it can at all.

But MySpace isn’t the only one in trouble. Online advertising on social networks is expected to be down sharply from previous estimates in December. According to the Journal:

EMarketer predicts that U.S. ad spending on social networks will drop 3 percent to $1.1 billion this year. In December, it projected growth of 10.2 percent for 2009 to $1.3 billion.

A lot can happen before 2011, and MySpace will need to work something out with Google before that funnel of advertising revenue is cut off. MySpace still leads the social networks in U.S. advertising dollars, according to the Journal, and Murdoch has expressed that News Corp. is working hard to improve MySpace. It will be interesting to see how and when these changes on MySpace will happen, especially as Facebook keeps chugging ahead with over 200 million users and counting.

Who says social web sites improve friendships? For while they can undoubtedly help us meet new people and stay in touch, their effect on the way we converse with one another face-to-face can be decidedly negative.

Two weeks ago I bumped into a friend whom I hadn’t seen in months, and we tried to strike up a conversation. But since we follow each other on Twitter, are friends on Facebook and blog-stalk one another, the usually enjoyable conversation quickly turned awkward. Every major update to our lives, after all, had already been published online.

So are social web sites ruining in-person conversation?

Wanted: A Conversation Tracker

Jeremy Hanks, an admitted Twitter addict, says yes. “Sometimes I assume that everyone reads my blog or sees my tweets,” he explained to me, “so I run into hang-ups in conversation. With so many voices now” — among them email, texting, calls, blogs, comments and social web sites — “it’s like we need a conversation tracker to know who’s heard what and where before engaging in a discussion.”

New York Times columnist Joanna Pearson, in telling the story of a clumsy encounter with a date she had Googled beforehand, wrote, “There’s something to be said for the spontaneity and authentic facial expressions of utter ignorance.” She concluded that sites like Facebook can actually make physical meetings “a little less interesting.”

Others argue that social web sites aren’t to blame for ruined conversations on their own merits. But as a collective part of an overly connected world, they’re certainly contributing to it.

Even my socialite kid sister has complained to me about how many mediums people are on while simultaneously having in-person conversations. “I was talking to a friend recently, and she was rudely instant messaging and perusing her Facebook account at the same time,” she recounted to me. “I couldn’t help but feel I was the one who was most negatively affected by the interchange.”

As it stands, the simultaneous use of multiple social technologies is often received by the bystander as, “Somewhere else, there is someone more important than you.”

A Poor Replacement

What’s more, social web sites and their related communication tools are increasingly being abused as replacements for the human touch, according to communication consultant Patti Wood. This despite the fact that, as she bluntly noted, “The Internet was designed to share information, not emotions.”

When asked if social web sites were spoiling verbal conversation, she observed, “The idea of being present in the moment is disappearing. Oftentimes we devalue our current situation — the friends and family around us, our surroundings and setting — for something going on somewhere else, somewhere that seems far more interesting that what is right in front of us.”

Still, many people think social networking sites enhance in-person conversation. Examples include status updates, which can spur deeper dialogue during in-person discussions later on. But it’s important to adapt one’s oral approach accordingly, or awkwardness can ensue.

Whatever you thoughts on the issue, no one can deny that social web sites have changed the way we communicate and subsequently converse in-person. But what fun is in-person conversation if all of life’s announcements were previously made public in 140 keystrokes or less?

Last.fm said yesterday that it will charge its non-U.S., UK and German visitors 3 euros (about $4) a month. Today the music discovery service says it’s also cutting off unofficial apps that are using Last.fm API, a move that has made many independent app writers pretty angry. The latter seems like a move to appease the record labels, but taken together, it looks like Last.fm is trying to develop a post-advertising business model.

By killing access to unofficial APIs, the company will also be able to rein in its royalty payments. And it’s been widely documented how tough it is for web services to monetize well with advertising beyond the aforementioned three markets. With parent CBS facing the same dire straits as most media companies, Last.fm needs to develop new revenue sources — fast. I admire the Last.fm team for trying out these new monetization models. Many other social networking sites would be well-advised to look beyond low-CPM advertising to scale their revenues, too.

Project Playlist, a Palo, Alto, Calif.-based service that allows you to create and share playlists, has signed up EMI Music, a move that will allow users access to EMI’s catalog. They previously ran afoul of record labels but seem to have made peace with them. Earlier this year, Project Playlist signed up the Sony BMG label. I like these kinds of socially aware playlist companies because they allow me to not only listen to my favorite tunes, but to discover new artists. (Related: More playlist startups.)

Traffic Marketplace, a Los Angeles-based ad network, has acquired fbExchange, an ad network focusing on Facebook and social media applications, for an undisclosed amount of money. TMP is going to use fbExchange to diversify its online advertising business to social networks. I first wrote about fbExchange back in 2007. It’s the brainchild of 83Degrees, a San Francisco-based idea factory started by Narendra Rocherolle, Julie Davidson and Nick Wilder. The trio are also co-founders of Webshots and 30Boxes.

“For us, our business is about exploring new ideas and growing them until they find a good home,” said Rocherolle when I reached him for a comment. Another Facebook-oriented advertising network, Lookery, which launched during the early days of the Facebook App Mania, sold off its advertising network and has refocused its business, too.

In response to a post by Steve Hodson, “Is Social Media Becoming a Social Mess?,” Elliot Ng said something that resonated with me deeply, even more than the valid question being asked by the original post.

“My problem with social media is that it is heavily focused on itself. Tweeting about Twitter. Blogging about blogging. You know what this reminds me of? The house of cards that our friends in Washington and Wall Street have created. Mortgages sliced and diced and resold many times… This is exactly what the social media community is doing. Reverberating from one tool to the other. Reaggregating onto aggregator services.”

This is a sentiment echoed by some readers in response to my post, Social web’s big question: Federate or Aggregate. Dameon Welch-Abernathy was increduclous about the fact that “Companies are building services atop services without a proven business model. Has anyone taken a step back and realized just how crazy this is?” Another reader had an even more colorful metaphor and compared the rise of many social web apps to “building floating gas stations for the flying cars that are still in early prototype state.” Others emailed me privately with similar thoughts. I have been struggling to package up their skepticism in a way I could share it with you. As luck would have it, my friend Pip Coburn sent me his latest weekly newsletter, exposing me to Herbert Simon, a psychologist with roots in cognitive psychology, complexity theory and behavioral finance.

What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.

I think Simon, who by the way made this observation in 1971, was onto to something here. Many of these social web services are essentially a way for us to communicate among ourselves. In times before cheap broadband, cheaper telephony and affordable computers, we used our mouths to communicate. We went and saw our friends and family — sometimes in their homes, but mostly in restaurants, bars or coffee houses. The only people who made money off that conversation and bonhomie were perhaps those who ran the establishments that enabled our interactions. Places with something special about them remained successful for years, while others packed up and went home. Our post-broadband world is no different.

As I said, back in July:

If someone can become the Dolby of the web — remove the noise and give us clear sound — then they are going to make a lot of money. And when I say sound, I mean data that is truly useful. But that would just be the start.

Our communication and our attention is going to flow to a few services — the ones that make it easy to have those conversations. Twitter and Facebook seem to be in that camp… at least till something new comes around!

Update: Dave Winer thinks that there is room for something to come up that occupies the space between Twitter and Friendfeed. I would say Dave lets add Facebook to the mix as well :-)

Given how much has already been written about Facebook Connect, you would think that the service has been available for eons. In fact the service that was first announced in May — which allows you to use your Facebook login to access Facebook’s partner web sites, desktop apps or mobile devices, then broadcast what you’re doing on those sites to all of your Facebook friends — officially launched today.

Nearly 100 web sites have implemented Facebook Connect as part of a pre-launch rollout. The social networking site claims that as a result, these sites are getting 66 percent more registrations and have 50 percent more engagement. I’m not sure how they calculate this with such pin-point accuracy; it seems like marketing hocus-pocus to me. Nevertheless, the number and quality of launch partner sites is one reason why Facebook is going to get more traction compared to its rivals. These are all highly trafficked services (with few exceptions) that will help Facebook Connect become part of the social web infrastructure.

Since I, too, have written extensively about Facebook Connect already, I won’t spend any more time on it. As background, just read two of my previous posts.

There is one school of thought which says that Facebook Connect could have a direct impact on blogs and blog comment aggregators like Disqus as FC can subsume some of their functionality.

Cyworld, the South Korean social network that launched in the U.S. with a splashy party in 2006 has packed up its bags and left the U.S. market. The social network, backed by SK Telecom, will layoff its entire U.S. staff and will continue to operate the English-language site from South Korea. The service really didn’t get any traction. Its localization efforts were mediocre at best. I bet other smaller marginal social networks meet the same fate.