Friendster, Orkut, Tribe, Ryze and LinkedIn – along with nearly two dozen more online communities that have cropped up recently – are furiously recruiting members who, in turn, recruit their friends, relatives, co-workers and just about anyone seeking an introduction to, or reference from, someone who might matter. Some networks count up to 100,000 people as members while others are claiming between 500,000 and one million.
These services, also known as social networks, aren’t just attracting members. They are raking in money offered by venture capitalists from San Francisco to Boston. Sequoia Capital has invested $4.7 million in LinkedIn. Kleiner, Perkins, Caufield & Byers have put $13 million into Friendster. Mayfield and media giants Knight-Ridder and The Washington Post Company have invested $6.3 million in Tribe.net.
To some e-business experts, the explosion of social networking businesses is all too reminiscent of the dot-com boom-and-bust phenomenon: An interesting idea pops up on the horizon, companies with vague business models are formed to exploit it, and venture capitalists see profits in the businesses, even though revenues have yet to make an appearance. “We’ve created this little bubble again with high prices and high expectations,” Andrew L. Anker, a partner with August Capital, told the Boston Globe late last year.
Still, networking services trying to turn themselves into successful e-businesses shouldn’t be compared to the likes of Pets.com, the poster child for the burst Internet bubble, according to some observers.
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