Social Networking: A Good Investment?


The classical definition of making a “good” investment is sinking capital into a person, product, property, service, or business entity expected to yield a return at least equal to that of alternative choices, comparable in risk and timeframe. Generally speaking, the underlying assumption about an investment vehicle is that its intrinsic value will increase over time.

Will this be the case with social networking? MySpace and Facebook, the heavy hitters in this space, have based their business models on the premise that people not only want to connect with each other in cyberspace, for social and business reasons, they want to share — publicly, that is — intimate details of their daily habits, desires, moods, and whereabouts.

Does willful exposure have an intrinsic value? If so, will it increase over time? I’m betting that neither is true. But, that doesn’t stop the offerings. On August 13, 2008, Yahoo introduced a new service called Fire Eagle, which allows its users to become human homing devices for their friends. This is downright weird. Just because something is technically doable doesn’t make it wise … or good business.

According to E-Commerce Times on February 1, 2008:

“Google is finding it difficult to monetize social networks,” said cofounder Sergey Brin, referencing to the host of partnerships Google has to deliver ads to such sites, including News Corp’s MySpace.

“We have had a challenge in the fourth quarter with social networking inventory as a whole, and some of the monetization work we were doing there didn’t pan out as well as we had hoped,” Brin commented. “But we are continuing the efforts and we are still optimistic about future quarters.”

According to BusinessWeek, on August 5, 2008, valuations of social-networking companies are way down:

Insiders at Facebook are selling stock in the social-networking giant, and the prices they’re getting for their shares suggest the sky-high valuation backers once placed on the company may prove unrealistic.

Electronic Nudity

I think what’s going on is real simple: Having one’s life become an open book on the Internet is equivalent to electronic nudity. The 18th chapter of Leviticus teaches us that nudity is private and must be respected. Privacy is a normal, necessary human need that is ingrained in us since childhood. To ignore it, I believe, is fundamentally unhealthy, immature, and dysfunctional. Eventually, a boundary-free life will lead to an emptiness that will cause its practitioners to withdraw and reject social networking as we know it.

How did we get here? We can trace the rise of electronic nudity to how Gen-Yers, or millennials, have been raised: like coddled, endlessly pampered children — as we see in this May 25, 2007, clip from 60 Minutes called “The Millennials.” These perpetual children need constant monitoring and protection, and that’s why they like to expose themselves on the Internet. At some point, however, even they will have to grow up! When they do, goodbye intrinsic value.

Making business connections via LinkedIn is one thing, and a necessary one at that, but engaging in electronic nudity to the point that one’s life becomes a voluntary form of The Truman Show is unhealthy — for the soul and for the investment portfolio.

POSTSCRIPT #1: In May 2010, PC World published results of a poll of 1588 Facebook users indicating that 60%+ of them are contemplating quitting the popular social site over security and boredom issues.

POSTSCRIPT #2: In June 2010, Jessi Hempel of Fortune proclaimed the social-networking party over.

POSTSCRIPT #3: In July 2010, BU assistant professor Evimaria Terzi wrote “Learning Not to Share,” about the risks and dangers of social networks.

POSTSCRIPT #4: In August 2010, gossip site Valleywag exposed Facebook founder Mark Zuckerberg’s privacy.


About the Author

Marc Rudov is a branding advisor to CEOs,
producer of MarcRudovTV, and author of the book,
Be Unique or Be Ignored: The CEO’s Guide to Branding.


© 2008 Marc H. Rudov. All Rights Reserved.


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