The Economist has two very interesting articles out on social networking  – Break down these walls, and Everywhere and Nowhere. The first focuses on the notion that social networking should follow the now well-trodden path on the Internet, where open standards trump “walled gardens.” They make a good point that companies like Facebook and Second Life look a lot like AOL in 1994, in terms of being closed worlds based on proprietary standards. The hope would be that, with history as a guide, the new upstarts might avoid being marginalized by the seemingly upstoppable momentum behind open standards. 

But what makes this issue interesting is the second article, where the subtitle says it all- Social Networking will become a ubiquitous feature of online life. That does not mean it’s a business. Interesting comparisons are made to the evolution of email, a now fairly ubiquitous and critical technology that’s not making any real money. We hear about crazy valuations being placed on social networks all the time (from $850 M for Bebo, which was actually paid, to estimates in the cajillion-billion range for Facebook), but it is kind of hard to identify where the profits to justify them could be found. Or, to use the fancier wording from the Google folks in relation to social networking, the ”monetisation work we were doing there didn’t pan out as well as we hoped.”

In this argument, social networking could turn into a social utility of enormous value, enabling all kinds of amazing things… but not generating a lot of money directly for any company providing it.  Facebook and others are certainly hoping to go down a different path, which I’m sure includes trying to copy a little more from Microsoft then AOL, but times have changed and it’s hard to say if it will work. So the questions are – do you agree with the Economist’s argument? And either way, is this a good or bad thing?

I can tell you that I agree with a lot (but not all) of the argument… and I think it’s great.