Cisco’s wrong bet on Social Networks

122 Comments

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 Tribe.net, 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.”

122 Comments

Ömer

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Ajoy Bhatia

News flash for Om Malik:
Seen on Wikipedia (and if you don’t believe Wikipedia, Om – too much of a social networking thing? – then, I’m sure I can find this news on more “reliable” old-school news sites):
On September 25, 2007, it was rumored that Microsoft might buy a stake in Facebook[29] and the rumor was confirmed a month later when Microsoft purchased a 1.6% share of the company for $240 million.[30] An outright sale of Facebook is said to be unlikely as founder Mark Zuckerberg would like to keep it independent.

I am still waiting for your blog post titled: Microsoft’s Wrong Bet on Social Networks

ajax

As everybody see with 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. Why Not?

sohbet

As a side note, Cisco Systems is now just “Cisco” (in a similar way to “Apple Computers” becoming just “Apple”, but done many months earlier).

Dustin

I think of it this way. Why isn’t every set top box in America part of a social network? Seems extremely logical to me. Have you forgotten Cisco purchased Scientific Atlanta?

vB-Hacker.com daki seo yarışması

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.ş

trademark registration

As a side note, Cisco Systems is now just “Cisco” (in a similar way to “Apple Computers” becoming just “Apple”, but done many months earlier). Cisco seems to be branching out into ever more diverse network related areas, and the management team has a good understanding that if they just remain with “selling pipes” then they’re going to lose. I wouldn’t be surprised to see more user focused technologies coming out in the future…

vB-Hacker.Com daki seo yarışması

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.

altılı ganyan

while most everyone else is busy puking on Cisco’s parade for their two recent acquisitions of Social Networking Companies, and wasting otherwise

Townsend Networks

I am just thankful that the internet is the one environment where Corporate money doesn’t always mean a better product. I guess only time will tell if Cisco can expand outside the bounds of their core offerings.

Adrian Keys

I too agree with the commenters who say Om is wrong on this one. I am not sure why Google would depart radically from its core and successfully launch a mobile phone while Cisco while also deviating would not be expected to do well with its social networking venture.

Both companies are financial powerhouses in their own right putting them in a position to make a real go at anything they choose. Besides, if Cisco can survive the DotCom bust, I have no doubt they can launch a successful social network.

Mike Walsh

Cisco bought the FiveAcross and the assets of Tribe for 3 primary reasons:

1) Per Dan Scheinman’s comments, they do want to allow their customers to provide more value to their audience. Cisco already has strong relationships with NBC (NBC is building out social networks with internal resources) and the NHL (NHLConnect) and I expect those relationships to become even stronger. Cisco recognizes that customer and audience engagement has changed and people want to collaborate with their peers. Cisco wants to empower their customers (NBC and the NHL, as examples) with capabilities to strengthen their own relationship with their audience. Look for Cisco to buy a video related company within the next 6-8 weeks.

3) Engineers and domain expertise is becoming expensive and scarce. Cisco has a history of acquiring developers and teams through acquisition. With the market becoming very tight, acquisition becomes a cost effective way to add resources quickly. They are also acquiring domain expertise in the area of social networking and online community development.

3) It’s a great Press event. I have no idea what the total acquisition prices were for both pieces, but my swag is $20M. They’re actually receiving quite a bit of press for $20M in an otherwise boring industry.

I believe that Cisco will acquire an additional 3-5 companies in the social media space and cobble together a full solution to offer to their clients. They will likely (or should) buy a service company that focuses on community best practices, if they’re serious about their strategy.

Ash Vasudevan

Seems like CISCO is not actually acquiring Tribe.net or its community. Today’s WSJ reports the following: “Cisco Systems Inc. acquired certain assets of closely held Utah Street Networks Inc., the San Francisco operator of social-networking site Tribe.net. Cisco, the San Jose, Calif., company that makes routers and switches that direct computer traffic over corporate networks and the Internet, said Utah Street uses a proprietary software infrastructure to create and maintain online communities on the Tribe.net Web site.” Tribe.net will continue to remain independent.

Om, does this change your analysis and opinion?

Daniel Spisak

I don’t think Cisco’s angle here was trying to use M&A to purchase “Internet Cool(tm)” but to take a social networking technology and see if they can get it to stick within a corporate framework.

The way I see this working for them is if they take the Tribe functionality and apply it as a kind of business social networking intelligence to a companies intraweb sites. Think of it as a distributed wiki perhaps?

Not that this is a sure thing or anything, heck I can still remember scratching my head when Cisco bought out Arrowpoint and then later gradually killed the product line by migrating its features to the higher-end router interface cards.

anonymous

Bunch of Cisco Kids who drank the Kool Aid now making strategic evaluations …

Let’s see where this Social networking investment goes.

Pray – what is Cisco doing with DynamicSoft acquisition? and with the Vovida acquisition?

Not every new technology Cisco puts its foot in is successful. Service Provider and Hosted business is foreign to Cisco. Cisco has lost several battles in Asia in the Mobile space where Ericsson reigns supreme.

Social networking, SecondLife, Web2.0, mashups and AJAX – I dont see Cisco making money off of these anytime soon. Maybe never.

I love reading Om’s blog.

Prashanth Pappu

OM is very wrong on this post.

I partly read this blog because of the many insider relationships that OM has. That is what I think primarily adds to OMs insights in tech trends. But looks likes OM is completely out of sync both with CISCO and its insiders. Dan Scheinmann used to be the MA honcho. He’s now the SVP of the media solutions group and a guys who “know [sic] it”.

CISCO prides itself in spotting technological trends and transitions better than any other competitor. SA acquisition made sense to investors/analysts weeks after its anouncement and nobody saw it coming or recommended it. It has a record of 7 out 10 succeses in MAs. And JC has talked about the need for CISCO to be more aggressive. CISCO is big on its push into CE and homes. And the biggest part of CISCO’s strategy is its ability to technologically unify disparate architectures. CISCO always sells the whole solution and many products and not one product like its competitors. And I think, that social networking is the main component of many sucessful web 2.0 companies. Even YouTube built a huge viewer base because of the member channels and its little communities. I would rather listen more keely to what the CISCO execs have to say about the whys of this acquisition than make a hasty judgement. Also, since when is Marc Andresen (used to be a has-been) an authority on anything?

Sam

Cisco is not getting into Social Networking. It is buying SN startups to provide SN services to its customers and employees.

Ajoy Bhatia

Your tone comes across as a very know-it-all smart-Alec kind of guy. I don’t think that I would bet even two cents on your business judgment when pitted against that of John Chambers.

What you quoted from Cisco:
““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.”

Your quote:
“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?”

News flash for Om Malik: Dan Scheinman did not say that Cisco has a relationship with any media company. He said that forming a relationship with media companies is part of their job i.e. it is what they are working on. Cisco is not there yet but it is the new direction it is taking. Also, it seems that you haven’t checked again for a very long time, Mr. Malik what Cisco does for a living. Here’s a quote from John Chambers that may serve as an eye-opener:
“Routing revenue grew year-over-year by 18%, switching revenue grew year-over-year by 13%, and advanced technologies’ revenue grew year-over-year by approximately 23%, not including Scientific Atlanta. Scientific Atlanta’s revenue grew approximately 21% year-over-year for the comparable period, aligned to conform to Cisco’s fiscal quarters. The advanced technology revenues are now becoming larger in terms of their total contribution to our top line than routing. This speaks to Cisco’s constant evolution moving into new markets and product adjacencies. Substantially all the advanced technologies grew year-over-year in double digits, led by storage, unified communications, wireless, and security.”

Here, advanced technologies includes voice, video & web-conferencing and VOIP systems – both hardware & software.

It seems that, if you ran a business, it would never change the products or services it creates, and so would pretty be soon be run into the ground. Consider your credibility against that of John Chambers before putting your foot in mouth.

I will be checking back with you when the benefits of current acquisitions and business direction changes start becoming more apparent.

Anonymous

continuing …

and once employees in the company get used to these tools and mashups its hard to get rid of these tools

Whats driving the tools – the good ‘ol router, switch and the CRS-1 all flattening the world and making discrete geographic groups appear as one community engaged for a common purpose –

Anonymous

I agree with five_whys

Its all a package. Unified communications is a facet of Social Networking as well.

Another facet is Blogs

Another facet is Forums

COmbine presence enabled Unified communications with all the above and you have perfect ENterprise Mashup for large companies.

Productivity shoots up and it all makes sense after that.

Peter

The NYT didn’t gets a quote on the Cisco acquisitin from would-be Cisco competitor, Ning. Brilliant stuff.

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