Online social networks20080323 - Online social networks...

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Online social networks Everywhere and nowhere Mar 19th 2008 | SAN FRANCISCO From  The Economist  print edition Social networking will become a ubiquitous feature of online life. That does not mean it  is a business A LARGE but long-in-the-tooth technology company hoping to become a bigger force in  online advertising buys a small start-up in a sector that everybody agrees is the next big thing.  A decade ago, this was Microsoft buying Hotmail—the firm that established web-based e-mail  as a must-have service for internet users, and promised to drive up page views, and thus  advertising inventory, on the software giant's websites. This month it was AOL, a struggling  web portal that is part of Time Warner, an old-media giant, buying  Bebo , a small but up-and- coming online social network, for $850m. Both deals, in their respective decades, illustrate a great paradox of the internet in that the  premise underlying them is precisely half right and half wrong. The correct half is that a next  big thing—web-mail then, social networking now—can indeed quickly become something that  consumers expect from their favourite web portal. The non sequitur is to assume that the new  service will be a revenue-generating business in its own right.  Web-mail has certainly not become a business. Admittedly, Google, Microsoft, Yahoo!, AOL  and other providers of web-mail accounts do place advertisements on their web-mail  offerings, but this is small beer. They offer e-mail—and volumes of free archival storage  unimaginable a decade ago—because the service, including its associated address book,  calendar, and other features, is cheap to deliver and keeps consumers engaged with their  brands and websites, making users more likely to visit affiliated pages where advertising is  more effective.  Social networking appears to be similar in this regard. The big internet and media companies 
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