Are US social networks communist and Chinese ones capitalist?

It occurred to me the other day that on Facebook, it doesn't matter how much money you have. The service is free and taking advantage of all of its features is free too. In fact, it's quite difficult to tell who on Facebook is rich and who is poor; we are all equal citizens in the Facebook commune.

In the real world, it obviously does matter how much money you have. Moreover, it is easy to tell who is rich and who is poor. People send signals about their affluence from their clothes, cars, housing, and almost all the physical goods they consume. Facebook, on the other hand offers almost no clues into your financial status because there is almost nothing to consume.

While US social networks appear to have achieved a near Utopian existence, Chinese social networks are capitalist hotbeds. The Chinese social network Qzone earns nearly a billion dollars a year from the sale of virtual goods. On this social network, it matters how much money you have; the affluent can purchase more scarce virtual goods to decorate their profiles and the poor cannot. If you are poor in real world China, you are poor in social network China. How is that for communism?

Our experience on Facebook today may be the garden before the fall. As virtual goods offer perhaps the best way to monetize social networks, I imagine it will be tempting for Facebook to taste the (virtual) apple. If that happens, I think we'll look back on these early days of social networking fondly.

Social Networks and Finding a Job

I spoke to my friend Christian today about a paper he was writing for a class at HBS about how social networks were affecting job search and recruiting sites.

Some random points I jotted down about my thoughts on how social networking will affect finding a job:

1. Social networks offer reach and targeting. That makes them equally useful to a company's marketing department as recruiting department. In that way, social networking isn't differentially impacting recruiting more so than other functions.

2. Social networks don't attract users that have "search intent for jobs."

3. Search sites (vertical search, Google) are probably more disruptive to the industry in my opinion.

4. LinkedIn is monumentally useful for job search, but isn't really a social network in my opinion. LinkedIn is a big database of contacts so it's useful for finding people.

5. Candidates find jobs through people with which they have strong ties (friends and family), loose ties (friends of friends), or no ties (strangers). Job boards specialize in finding the jobs in the "no ties" department so are less affected by social networking. Social networking can increase the number of people in the "loose ties" group though.

6. New information such recommendations and people's social networking "fingerprints" may become part of the job application.

LinkedIn is Not a Social Network

LinkedIn is a fantastically useful service, but I'm not sure I'd call it a social network. LinkedIn's rich database of contact information is a highly valuable business tool, but the company's value as social network is limited.

In a social network, you get utility from fact that your friends are on it. On Facebook, I can see the pictures my friends upload, get invited to events, and generally keep in touch with my network. If I were on Facebook with a random set of people I didn't know, I'm certain the service would be of little value to me.

On the other hand, I get almost no utility from having "friends on Linkedin". Sure, it's a nice way to store the contact information of professional contacts, but I can do so in Outlook, through Plaxo, in an excel spreadsheet, or on my phone; each of these options is only marginally less useful than LinkedIn at saving people's contact information. LinkedIn has some value as a social network, but it pails in comparison to its value as business tool to find contacts.

LinkedIn's primary value is as a giant database of contact information. It allows you to get in touch with the right person, at the right company, at the right time. It's hard to emphasis how valuable this is (or will can be) for facilitating sales, hiring, and business development. If you are a paper salesman in Scranton, you can look up the contact information of who is the purchasing manager at the local law firm, send them a message, and then hopefully connect. If you are a recruiter, you can find people near you that have the skills that your client is looking for. Before LinkedIn, you were reliant on your own network of contacts or cold calling into the main company line and working your way through a phone tree blindly.

I'd say that 99% of the value of LinkedIn is that people on it are NOT my friends. In fact, the fact that I can only freely see the contact information of my friends is a clever "freemium" strategy by the company -- I have to pay up if I want to view the information of people who are not my friends.

By calling its self a social network, LinkedIn got its users to sign up, invite their friends, and populate the database. Calling its self a social network has been a great marketing technique to get users to build a data asset. In fact, companies that have marketed themselves as large databases of contacts (Plaxo, Jigsaw) have been far less successful than LinkedIn.

I think LinkedIn knows that its primary value is as a business tool to connect people who don't know each other but who should do business with each other. The company is still in the preliminary stages of developing this tool, but it one of the most valuable data assets in the world today.