Today’s Wall Street Journal has a piece about the rush of venture capital money into social-software companies, triggered by the popularity of Friendster.
Viewed from the perspective of a technologist or an anthropologist, social software — tools that help people meet each other and work and play together online — is fascinating and hot. And maybe a handful of entrepreneurs will even figure out how to turn it into an actual profitable business.
In the meantime, though, it seems like tens of millions of dollars are being poured into businesses as a matter of blind faith. This is not bitter words from a grizzled veteran of the dot-com bubble; it’s what the venture investors are saying themselves. Robert Kagle of Benchmark Capital calls his investment in Friendster “a leap of faith” and says, “If you’ve got this level of engagement, and people spending upwards of an hour at a time [on the site], that will translate into a set of economics that will support this business model.”
Somewhere around the end of 2000 I thought we’d collectively given up the notion that site traffic, unique visitors, page views and “time on the site” were in themselves financially significant, even in the absence of a careful and sensible plan to derive revenue from said traffic. Of course, maybe such a plan is sitting within Friendster’s prospectus. But then it wouldn’t be a “leap of faith” at all.
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