VC's Say : Please, no more social networks
REDWOOD CITY, Calif.--The consensus here at the Dow Jones Web Ventures conference this week seems to be that the world doesn't need another social network.
That's considering that the advertising model for even the largest social networks like Facebook has yet to fall into place--despite that company's projected $15 billion valuation. Or that sites supported only by advertising will get squeezed in a down economy and that venture capital is cooling for Web 2.0 startups. Or, more likely, that some audiences--like CEOs or cat lovers--simply don't need their own social networks.
"If I see another business plan for a social network, I might blow my brains out," Barry Schuler, managing director of Draper Fisher Jurvetson, said during a panel discussion this week.
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One of the biggest problems facing social networks is to recreate the kind of powerful advertising network that Google has with its targeted search ads. Facebook tried its hand at a system that matches people's consumer behaviors on the Web with ads in the online community. But it scaled back on that program, called Beacon, because of consumer privacy concerns.
Tim Kendall, a product manager for Facebook who spoke Thursday at the conference, said that despite that misstep, advertising will eventually be social. Facebook ads, for example, can pop up when a friend signs up for a new application or becomes a fan of a band, say Dave Matthews. As a Facebook user, you might see a Tickets.com ad for a Dave Matthews concert.
"Advertising will be about leveraging the true actions that your friends take and using that as the advertisement," Kendall said. He added later the Facebook will also work on better options for brand advertising. "We'll derive a meaningful set of revenue from brand ads. We need to address that market, too."
Still, for any other small potato in the business, VCs are buying it.
"There's an assumption that the phenomenon that occurred with Facebook and the young generation is applicable against anything," said DFJ's Schuler. "Not to pick on anyone, but I'm not sure ExpertCEO will engage in the same way that others do like Facebook."
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