Social networks poised to shape Net's future

Yahoo and other big portals may have to team with the likes of MySpace to take advantage of their growing influence on Web surfers, analysts say

Social networks, mobile video and "Googlism" will continue to transform the Net in years ahead, Piper Jaffray analysts said on Monday at the opening of its annual Global Internet Summit.

"The Google revolution is not over yet," said Safa Rashtchy, managing director and senior analyst at investment firm Piper Jaffray, referring to the fictional term, Googlism. The search giant "has been inspiration for many new companies", as well as changing how many companies are formed today, he said.

Rashtchy opened the three-day conference here by highlighting such current Internet trends. The conference, in its second year, will focus on several topics, including online entertainment and advertising, international markets and social networks.

Social networks, for example, are poised to shape the Internet's future, Rashtchy said, despite some scepticism about how they will make money. Social networks like MySpace.com are already challenging traditional portals. MySpace, for example, has surpassed MSN and AOL by measure of monthly page views, Rashtchy said, and its traffic equals roughly 75 percent of Yahoo's, the No. 1 site on the Web.

James Lamberti, a research analyst at ComScore who spoke at an opening panel, marvelled at the rise of MySpace, which attracted 50 million visitors in March. "Google did not grow this way — it was much slower over time," he said.

Yet other panelists openly questioned how and if these companies make money, comparing the frothiness around social networks and video sites like YouTube.com to the height of the Internet bubble.

Growth opportunities within the market would be for niche communities targeted at middle-age or young Web surfers, Rashtchy said. For example, a host of family social networking sites have cropped up already. Rashtchy suggested that Yahoo and other portals may have to team with MySpace and others to attempt to direct their mounting influence among Web surfers.

The overarching thesis, Rashtchy said, is that online advertising dollars continue to lag behind Internet usage in the United States. Roughly 172 million Americans visit the Web in a month, according to ComScore, but online ad sales, expected at $16bn (£8bn) in 2006, are still a small fraction of the hundreds of billions of ad dollars spent annually. In the next 10 years, this gap will close, but it is likely never to disappear, Rashtchy said.

For that reason, content and communities are corners for investment and growth, Raschtchy said. The advertising gap is not likely to be closed by blogs or social networks, however, researchers said. That's because blogs can contain some unsavory material that marketers often don't want their products to be associated with, they said.

Mobile devices are another growth opportunity, Rashtchy said, and video will be a particular complement. "This is going to get big, folks," he said.



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