Datamonitor: Social Networks growth to level in five years

Global - Revenue for social networking (SN) services is projected to be US$965 million (S$1415.17 million) this year with 230 million active members, according to Datamonitor's recent study.

Global growth will peak in 2009 and last to 2012 with the US levelling first. To date APAC accounts for 35% memberships.

"The Future of Social Networking: Understanding market strategic and technological developments" examines virtual communities and online SN sites. It reports this medium for human connection represents a cultural trend that will profit infrastructure, social network providers, as well as wireless technology suppliers.

Datamonitor's technology analyst, Ri Pierce-Grove who authored the reports says barriers to entry are virtually non-existent, and both competition and innovation are ferocious as users have options - from generalists like MySpace and Facebook to individual networks on DIY platforms like Ning.

The proliferation of internet connections contributes to SN growth and sites which allow content-distribution have a long tail of geographic distribution. By 2012 the revenue is expected to rise to US$2.4 billion (S$3.51 billion).

The general outlook and prevailing sentiment is that of "excitement combined with anxiety", the report reads. Two schools of thought lurking are "players that fear missing the next Google, the next Yahoo" and the cynics that look back at the few survivors from the bubble previously. Hence, SN sites are postponing going for IPOs.

Pierce-Grove says, "The extraordinary proliferation of online social networks is fuelled by real innovation and is substantially changing the way we communicate. However, the hothouse atmosphere of easy capital, media attention, and user curiosity which stimulates creativity will not be sustained indefinitely. All players therefore must develop a two-pronged strategy in order to survive the extremes of heat and eventual chill which this market will undergo."

Datamonitor advises technology providers not to neglect support in terms of scalability and availability as SN platforms are being brought to the market with firms engaging specialists to create for the masses. Media and search companies among others are interested in the databases these SN platforms have. Operators are expected to experiment and look to optimise features in sustainable operational models.

"As the market becomes more crowded, it will become harder for social networking sites to remain independent. Acquisition can solve scalability issues, improve content and search capabilities, and extend visibility and reach," she says.