Analyst: Social networking faces uncertain future
Social-networking sites will enlist 230 million active members by the end of the year and will keep attracting new users until at least 2009, according to an analyst report. But investors are still wary—and for good reason, as long-term growth is by no means certain.
Context & Ripple Effects
CNET put the framing question on record in June 2006, asking whether social networks were a future portal or a fad. This analyst report is the first quantitative answer in the corpus: 230 million active members across social-networking sites by end-2007, with user growth projected to continue through at least 2009.
The tension the report exposes is between adoption and conviction — membership curves keep climbing, but investors are treating the audience as unproven because long-term growth is explicitly flagged as uncertain. That gap between usage data and investor appetite is what makes the report newsworthy rather than routine forecasting.
First-order effects
- Social-networking sites gain a headline number to take into advertiser and partner conversations — 230 million active members by year-end — but must pitch against an analyst verdict that their growth runway beyond 2009 is unproven.
- Investors weighing stakes in social-networking properties get a formal reason to discount valuations: the report itself concedes that sustained growth past 2009 is not assured.
Second-order effects
- With member counts no longer the differentiator, the burden shifts to monetization — advertising performance becomes the metric that decides whether investor wariness deepens or eases.
- Sites competing for the same wary ad dollars face pressure to demonstrate engagement quality rather than raw membership, since a shared 230-million-member figure makes scale alone a weak sales argument.
Third-order effects
- If growth does stall after 2009, the sector consolidates around whichever platforms convert membership into revenue, resolving the 2006 portal-versus-fad question in favor of a few durable destinations rather than a broad field.
- The pattern — analysts certifying user growth while withholding endorsement of the business model — sets up social networking as a test case for how markets price audiences before they price businesses.
The trend: Analyst attention on social networking is pivoting from counting members to questioning whether the audience can be durably monetized, with 2009 positioned as the credibility deadline.