Some corporate conglomerates that were eager to offer huge sums for social networking sites (Rupert Murdock paid $900 million to acquire Myspace.com) are now rethinking their stratagem. These buyer-hungry interests are learning that their offers don’t match up to the potential revenue generated by these sites. The New York Times reported on September 22, 2006 that many of the social networking sites, “have attracted large audiences but little revenue.” The Times article also reported that big companies like Viacom, currently in negotiations with Facebook.com and its 22-year-old CEO, are realizing that their offers may not be lucrative once they acquire the software. Facebook, a site create by Harvard student TK for students to network, generated $50 million last year, not anywhere near the $750 million offer currently on the table.
The popularity of the software itself, though, does not seem to be on the decline, but rather is gaining speed in the cyber world. Major companies and search engines like Yahoo are trying to develop and launch their own social networking software, and open source software is available for smaller companies with the same intentions. Drupal, a popular open source social networking software, is increasingly popular for companies who choose not to invest in the thousands of dollars it would take to develop their own software. They can purchase the rights to the software to then adapt it into a wrapper that has the look and feel of their website. Sites like Zaadz, a socially conscious focused company, and decayenne, a place for young adults of high socioeconomic status to meet similarly inclined folk internationally, have notable traffic and don’t appear to be gearing up for multi-million dollar profits or entering into discussions with corporate buying powers. Wikipedia lists 71 different social networking sites that currently live on the web, with Myspace boasting the largest membership at more than 108 million.
Corporate buyouts are not a new trend, as companies are smart to target new technology when looking for investment options. Perhaps some view the exorbitant purchasing bids as nominal, given the potential future growth of social networking technology. In the meantime, these sites house their most viable demographic, a gold mine for advertising dollars.
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