Network effects

Like the dot-coms of the 1990s, most SNSs rely on a simple business model based on the principle of network effects. The SNSs are thus able to overlook the heavy initial investments that bring in considerably low returns. Initial losses are used to build the much valued market base. The logic of the network effects with regard to SNS is clear. Since SNSs are primarily interested in networking the community of users, as the client base gets larger, the number of 'connections' that each client forms increases. Soon all clients are connected to all others, following the 'six-degrees' principle.

Sustaining the client base

Extending the logic of the network effects model, SNSs need to sustain a large client base. There are, however, issues in maintaining this client base and progressively increasing it. To maintain the client base, there would be a constant need to sign up more and more people and connect them to ones who are already part of the clientele. This would require the SNSs to link up with an 'application'. In most cases the application that sustains the SNS is based on local contacts and business dealings conducted by people.

Viral marketing

Viral marketing is yet another model on which the client base is created and sustained. It appears that viral marketing is successful because it latches on to information that may be available in other databases. Viral marketing, however, raises quite a few issues regarding privacy.

Manageability of the Client Base

We have dealt with the creation and sustenance of a sizable client base. Is there, however, such a simple and direct ratio between a large client base and the success rate of a SNS? A huge client base also seems to generate several concerns. Manageability of this large network is one such concern that SNSs will have to address.

Updating the network base

It would not be too hasty to shift our attention to the updating of an information database. As several SNSs have observed, clogging their members with excessive information is not the only way to ensure their loyalty. They undertake an updating of their pool of information as well. This includes sorting out the information intelligently, which enables redundant and unnecessary information to be sifted out. Further, a prioritizing of the information provided helps the member to access the large amounts of information provided.

An Interactive Information Base?

SNSs have shown that it is possible to provide the member with information that would be sifted as per his/her requirement. For example Tickle Networking provides its subscribers with an opportunity to contact prospective partners by conducting an IQ and personality test. A service of this kind however places an enormous burden on the member of manually maintaining his/her network.

K-Praxis will follow up with a fuller report soon.