Pownce (“Create a network of friends and share stuff. It’s free and easy”) is shutting down.
On the surface, it doesn’t seem that lack of funds is an issue (“Mike and I, along with the Pownce technology, have joined Six Apart, the company behind such great blogging software as Movable Type, TypePad and Vox”), but I can’t help wondering if more “social media” sites, whose numbers have exploded over recent years, will shut down as a result of the “credit crunch”.
I’m not sure that many of the social media sites have solid business plans or are profitable. In fact, there seem to be echoes of the early dot com boom where the mentality was simply a huge, expensive grab for traffic and signups without profitability being considered to any great extent.
There’s always consolidation in any new industry as the more profitable players squeeze out the less efficient guys, but to what extent will this happen with social media sites? Will we see consolidation, or a huge meltdown?
I don’t think there’ll be an outright meltdown, just more companies deciding to fold, sell or scale back. A lot of it having to do with advertising revenue; AdSense and such have a big part in keeping some of these sites up. Sure the outrageously useless ones will go down in flames, but the signs point to a more measured weedout process. Interesting times, nonetheless.
The Pownce closure is symptomatic of the rush to develop things for a Web 2.0 world. People are coming up with brilliant ideas, but not considering how they’ll make money from them. When asked they say they’ll have some form of advertising in the future. What they haven’t worked out is the fact that advertising itself is dying on its knees. There is software to remove adverts from web pages (including from software giants like Symantec) and we can skip through TV ads using Tivo or SkyPlus. So, advertising revenue is a non starter for these services like Pownce.
Just because it is a brilliant idea, doesn’t mean it is a business. Even the founder of Facebook has admitted in a recent interview that they have no real idea where they are going to make money – and won’t be worrying about that for another three years. Given the credit crunch, Facebook’s investors (Microsoft) are going to need a much quicker return. With no real idea for generating revenue and with reduced advertising spends imminent, even massive sites like Facebook could disappear. Not because it isn’t a good idea – but because it isn’t a good business.
Same is true for many internet marketers – they have great ideas but no real business plan (and that’s why so many of them fail).
I think that more social media sites will die, as the market is already overcrowded and there can only be so many sites that exist.