Monday, October 22, 2007

Social Networking Sites – Discussion with Matt Cohen of Large Small

I had a coffee with Matt Cohen this morning at Primo360 which has become my office away from the office. Actually, I enjoy their flavor of espresso. Matt and I discussed the Social Networking space and the phenomenal buyouts going on. There are many social networking startups in Austin so of course we see a growing number of deals from this space.

Matt believes that Facebook is the new AOL for the twentysomething generation. For those who don’t remember, AOL was started as a community site to connect with friends and family and there was plenty to do on the site. AOL later in life changed to an advertisement model and became just another “channel” on the web. Matt indicated that the twenty something generation and younger communicates either through Facebook or through text messaging. The email system that the older generation uses is too open. Anyone can send you an email message. This is validated by the spam filter on my email inbox which captures over 500 messages a day now. Facebook lets you control who sends you messages and who you communicate with. It’s a closed world in which the user has more control.
LinkedIn is a business networking site that let’s users select who they want to connect with. I have over 400 connections now, and over one million contacts only three degrees of separation away. The problem with LinkedIn is that aside from connecting, there’s not much else to do on the web site. How long do people really hang out at the LinkedIn site? It’s log in, take care of business, and log off.

A small eco-system will continue to spring up around these social networking sites. Investing in them is a zero or a one. You either hit it big or you lose it all. It’s those huge payoffs you read about in the news that keeps entrepreneurs pursing what I call the “high tech lottery.”

Best regards,
Hall T.

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