Social networking: competitive differentiation strategies

2007 was the year that social networking became the norm for many Internet users, as initial strong growth pushed the user base into the multiple millions. But it was also the year that sounded warning bells for those who believe social networking represents the next frontier in online advertising revenues. A sobering slowdown in growth, combined with a more worrying drop in usage of social networking sites, has highlighted the significant challenges that the big established players, in particular, face in keeping users engaged.

This could well sway the odds in favour of some of the more specialised sites, who are able to focus on catering to the needs of different audiences. In the short term, all players will be aggressively developing new ways of making sites stickier (and more profitable) and forging new partnerships with third parties, ranging from mobile operators to application developers.