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Cisco’s wrong bet on Social Networks

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A few months after switch-and-router maker Cisco Systems acquired a content-management start-up, Five Across, the San Jose giant is going to acquire the assets of, an early social network, reports The New York Times. Cisco, is clearly experimenting with social networks, and that doesn’t necessarily mean it will be successful.

Social networks and Cisco pairing is as odd as the relationship between Angelina Jolie and Billy Bob Thornton, aka Fembot and the Freak. That didn’t work out, and neither will this.

“The idea that Cisco is going to be a force in social networking is about as plausible as Ning being a force in optical switches,” Marc Andreessen, co-founder of Ning, a Palo Alto-based social networking company told the New York Times. Aptly put! (Read: Ning: let 000s of social networks bloom.)

“Part of our job is to form a relationship with media companies and deliver technologies and services to them, so consumers can consume what they want online,” Dan Scheinman, Cisco’s M&A head honcho, who know the Media Solutions Group, tells the Times.

It is a bit of a head scratcher: What media companies does Cisco have a relationship with? Last I checked they sold equipment to large corporations, cable companies and phone companies? And those guys – they can’t even get people to use their email!

If cable operators and telecom are the “media companies” then they are the antithesis of cool, and social networks thrive when they are cool. Media companies and service providers aka incumbents want control – Social networks thrive when there is no control, and the community is allowed to mutate.

News flash for Cisco: This social software thing – it is too marginal, doesn’t make money and can’t make you cool. Stick to what you know best – plumbing hardware –sell tons of it, make money, and learn to live with the fact that you are rich and old school.

Don’t make me bring up pesky issues like: that in last ten months the only optical contract you have announced was an agreement with National Lambda Rail, and we can’t take that seriously, because as NLR annual report notes: the equipment was “provided under very favorable pricing by NLR’s founding member, Cisco Systems.”

98 Responses to “Cisco’s wrong bet on Social Networks”

  1. Cisco has weathered the dot com bomb pretty well, and has expanded into VOIP pretty well, moving into video with Scientific Atlantic and backend stuff to support video delivery, and expanding into video conferencing / telepresence.

    There’s no reason why Cisco can’t expand the idea of social networking into the corporate / intranet world.

    Cisco’s latest tag line:
    “Welcome to the human network.”

  2. Cisco, like the newly relaunched Ning, recognizes the power and importance of enabling people to connect to people. It’s interesting that both Marc Andreessen and Om Malik have snickered at Cisco’s entry into Social Networking. Since Andreessen would be happy to have companies in addition to individuals use Ning to build community sites, Cisco’s new venture means more competition.

    Anyone who misses or downplays the enormous potential of encouraging and empowering companies to connect to, interact with, and learn from their their customers … can’t see the forest for the trees.

    My guess is Cisco will use Tribe and Five Across technology to accelerate plans to offer business clients web platforms to tap into consumer passion. Think Dell’s crowdsourcing IdeaStorm site, or perhaps targeted crowdcasting like that offered by Idea Crossing.

  3. Interesting thread and lot of guesses.. Here is mine!

    1. Social networkings are becoming important for any company- however, unless thats the company’s main business, no one acquires a company to build a social network for their customers and other stake holders! Even though Cisco is big, I am sure their web group has enough ability to create a professional grade tool to create a social network.. so saying that they acquired companies for this purpose doesn’t make sense.

    2. In the same line of argument, if Cisco acquired this company to just build social network for their customers and stakeholder, they wouldnt have made a bid deal out of acquisition.. a VP of a media business unit talking this topic clearly refutes this and even a thought of addressing or mastering “content resolution” doesn’t fit with what is apparently a new business or accelerting a nascent business move.

    3. It does make sense, at-least the way I see it, for Cisco to fit social networking toolkit while preparing to fight with ALU-MSFT-MOT-TLAB for IPTV infrastructure. It is clear that Cisco is one of the players for IPTV, its also clear that with Linksys and Scientific-Atlanta, Cisco is probably second only to MSFT in terms of having entry in consumers’ homes. If I have to take a guess, this is just a preamble to a bigger acquisition that can create a credible interception strategy w.r.t. MSFT stronghold on upcoming IPTV saga..

    just my 2 cents


  4. Let’s not criticize Cisco for trying to innovate.

    Just because they are already big does not mean they don’t need to try new things – in fact, it is all the more important for big companies to be innovative, because their inertia makes it all too easy to keep on doing the same thing.

    At one time there was a market leader for buggy whips, and they didn’t want to mess with a good thing, until they woke up one day to realize everyone was riding around in these so-called “automobiles.”

    Cisco’s got thousands of wealthy clients that are all going to conferences where the keynote speakers are telling them they need to innovate, get into social networking, connect everyone, everywhere, etc.

    Boeing is much more likely to sign up for Cisco’s Social Networking Platform than to plop down $10 a month for Ning’s corporate service and have Google’s Adwords running down the right-hand side of their web pages.

    Corporate clients will be looking for security, control, and customization out of their social networks, and Cisco, while they need to get up to speed on the product, are already very familiar with how to service these corporate clients.

  5. 5Tacos

    I agree with OM; Cisco and any other switch/router company is going to have a hard time trying to build, buy, or invent a social networking product that fits into “telephony networking”. That’s the problem OM is trying to highlight.

    I would find it hard to believe that JC or anyone else in the upper echelons knows or is passionate about “social networking”. Probably some entry level customer support person, 18 management levels down knows what it means, but they aren’t going to give him the ball. “There is no way someone other than us ‘smarter people’ knows how the world is changing…no way!” – cisco sr mgmt.

    You end up with dinosaurs trying to build a next generation product unlike anyone of us has seen. It won’t work and as OM said, they should just stick to switches & routers.


  6. indeed sounds odd…but maybe the relevant angle to look at it might be that Cisco is thinking in the direction of FON (consumer broadband hardware coupled with social networking…).

  7. Darian Patchin

    I was VP of advertising at and left late June. Here are my thoughts which I’m surprised folks having really been discussing.

    Actually, this is less weird than you think. From almost the time we launched we had a number of large companies and professional associations that wanted to use the technology to service and communicate with their professional members, resellers, sales teams etc. to share information in a private or public way–remember Tribe is primarily discussion forums based on social network or affinity.

    So, I don’t see the acquisition as a consumer play but a technology one for their business needs. Tribe still has the best social networking technology platform out there (although front end features may be a little barren at this point).

    Interestingly, all any of the reporters had to do was ask a few previous employees but that would be to much effort…

  8. Thanks, Om. But huh?

    Cisco not a software company? Now you are going to extremes. I imagine if you asked Cisco employees what Cisco was that 9 out of 10 would say a software company. BGP, NAT, VPN, VOIP, etc are all software. Hardware is a commodity for the most part and if it’s not it will be soon. What about Apple? They produce software, hardware, services including social networking’ish and they sell content and they’ve been an ISP for a while.

    When google rolls out its free wifi connections or free fiber or free whatever connection, what will they be considered? Their revenue is driven by advertising just as the original media companies revenue came from only this time it’s on the 4th network while the traditional media is still investing heavily in the first three, print, radio and tv. Those are no longer the most efficient delivery platforms for marketing. Besides, of the money cisco has spent on acquisitions during the past 12 months, how much do Tribe and Five Across represent from a % standpoint? I would be surprised if collectively they are more than a rounding error.

  9. I can only imagine this post playing devil’s advocate. Not sure what routers have to do with running a successful social networking site or any other successful business for that matter.

    As far as I know there are many successful conglomerates and other companies operating very diverse businesses and doing very well…the Writer should know that better than most.

  10. I linked over here for the express purpose of seeing some of the humor inherent with such an acquisition. I orphaned my account(s) there long ago (heh) but Tribe represented the right way to do regional focus as far back as early 2005.

    Social networking is much sexier than the XML company they purchased — it is something everyone can weigh in on. Still, I’d be very curious to see Cisco uses the Tribe and Reactivity teams. A truly federated social network contained within a larger enterprise environment would be an interesting niche.

    I say they should apply that to their lines of business to get better traction with their CCO, SMARTNet, and other service oriented revenue streams.

  11. Social networks are great for building communities around devices. Slingbox comes to mind as a company that has a great community around its device. I can imagine several ways Cisco could use it. Communities for hw products, community around its massive educational programs, internal knowledge management, and support for its products are just a few.

    I’m anxious to see social networking work in a corporate environment. I’m not sure on the perfect app for it, but I believe we will see successful large scale implementations. Maybe Cisco will be the leader. I applaud them for taking a risk. Even if it fails, they are taking an interesting swing.

  12. G,

    you are entitled to your harshness. how else would I learn new things – rather forced to re-think! Again, maybe I missed it, but share your wisdom on content resolution.

    On Marc’s quote, I am just using it to make a point.

  13. Billy Clinton and David Dean,

    first of all, thanks for your comments. Clearly, you guys have spent a lot of time thinking about the issues, and thanks for sharing them with rest of us.

    On the issue of IPTV, well a few things which worry me is the lack of presence they have in telco networks, despite all their spin, it hasn’t happened.

    The IPTV is turning out to be a Alcatel-Microsoft-Siemens-Tellabs play for now. They have Scientific Atlanta, which I admit is a good way to get into the consumer living room but from a device perspective.

    Cisco’s is just another player in IPTV, and we shall wait and see how much penetration they get in that market.

  14. OM – You missed it completely. Disappointing – I am not even going to try to explain why you missed it by a mile – and that’s being kind.

    A couple of days ago you were beating up on Ning calling thier effort “quixotic” (I agree with you completely). Now Andreeson is seems to be the indirect source of authority on Social Networks (via the NY Times). I am a regular reader of your blog – but here you are completely wrong. I mean dead wrong. It is not about Social Network – it is about the content that will eventually flow through these social nets – and the “content resolution” can happen deep in the networks…. as in CSCO routers. And if the term “content resolution” is one you have not heard before – it will perhaps explain why you missed this whole CSCO thing completely.

    Sorry to to harsh.

  15. Tomo,

    thanks for your thoughts, and as always they are thoughtful and reflective. I appreciate them deeply, but would respectfully disagree.

    I think the biggest challenge for the big companies will have when it comes to “media” is the mindset. They are going to have decouple their traditional ownership mindset before they become players in social-anything.

    They will have to become more user friendly and they are incapable of that. If that was so, SBC wouldn’t go crying into the arms of Yahoo for its DSL services.

    Similarly, Cisco is a mighty fine company and does a great job of selling devices – switches and routers, storage networking products and even a tiny bit of optical. Software has never been their strength, and it will never be.

    It is basically the “sales force” DNA issue. Regardless, of what I think, hopefully the time will tell – whether am I being harsh, wrong and off base. Or perhaps right.

  16. Cisco is probably considering bundling this social networking capability into their existing products. For consumers it could be a linksys wifi unit it acts as a mini server for your personal social network and for the enterprise it does the same thing….kinda like a web3.0 version of the intranet but residing in on premise network equipment that is already meshed together for redundancy, etc.

    Relations with media companies can be as ss simple as a vendor/customer relationship. Traditional Media companies are huge consumers of IT infrastructure and cisco gets a big piece of every IT dept budget.

    Om, A bit harsh on the telcos and cable co’s. I consider Comcast a media company AND a telco/cable/isp too. TimeWarner too. Cool factor rising on Comcast for sure.


  17. Emma,

    well at least there is some “approval,” and we are grateful for that. Of course, its scorn that also makes us think different, so thanks for your opinions. They are highly appreciated, despite our minor disagreements.

  18. With Second Life getting involvement from the IBM & Cisco guys, anything seems to go now. Who knows where we’re headed in technology and business? This could be a Third Life. :))

  19. With all due respect to Marc Andreessen, I believe that it’s possible for Cisco to evolve. Some thought it was odd for Cisco to be in cable TV infrastructure, products and services business (aka Scientific Atlanta).

    It’s conceivable that Cisco’s enterprise customers would consider Five Across for internal communities of interest, behind the corporate firewall. Tribe could be applied by the cable MSOs or even Telcos to help them develop consumer communities, like a SaaS business model.

    Cisco also intends to be a force in consumer electronics, which was the focal point of their “Human Network” vision demonstrated at this year’s CES in Las Vegas. Apparently Linksys is a launch pad for other ventures.

  20. Ash Vasudevan

    This seems like an unrelated acquisition on CISCO’s part. If there is anyone who can make acquisitions work, it is CISCO. They have a successful M&A track record (mostly related acquisitions). However, my initial reaction was not “Why Social Network”, but “Why Tribe”. At this point I have more questions, and fewer answers.

  21. Dan Scheinman gave a private talk I attended in late 2005. He said he had an early opportunity to invest in Myspace but didn’t pull the trigger (he thought privacy concerns would stagnate social networking).

    He’s got a vision of morphing Cisco into a consumer brand through hardware (ex Linksys) and internet. As tempting as it is to say Cisco’s jumping into social networking in 2007, it sounded like Scheinman has been envisioning this for a while…

  22. Re: cable operators and telcos as “media companies”… I called Verizon a few weeks ago to cancel my landline. The rep who picked up said “thanks for calling your broadband entertainment provider”. I’m surprised they don’t have a social network :)

  23. Cool is subjective, and MySpace became MySpace because it was cool at one point. Now its just big.

    Cisco makes boxes – switches and hardware – not social networks. that’s all they are. and that’s not cool enough for them!