With Social Networking sites such as Myspace being sold to Murdoch’s News Corp for $580 million and Friends Reunited snapped up by ITV for £120 million you can’t help but ask….what are these companies actually buying? Is this dot.com madness again, and are these corporates going to end up with egg on their faces and revolt from shareholders?

As Co-founder of Rareface, a Social Networking solutions provider, Maz Nadjm has agreed to shed some light on the whole Social Networking phenomenon.

Michelle: So Maz – why are companies such as News Corp buying into Social Networking for such huge sums?
Maz: Actually News Corp bought Intermix Media who had acquired Myspace which quickly become their biggest asset. Murdoch realised the value in the pool of data, specifically the human data which it contained. This includes lifestyle information such as interests, goals and music tastes. You can also access a massive audience for your personal or business services. As a member of a community which has over 98 million registered users you can search for a specific interest that could potentionally bring up in excess of a million matches. This is an extraordinary and unique concept.

Social Networking is a buzz term right now. To give Murdoch credit, he has recognised other strategic benefits such as how communities can be part of his global media presence. He has bought an asset with a huge base of members which opens up the possibility of strategic partnerships, in addition to the traditional advertising model. The possible sale of search engine capabilities by working with Google, Yahoo or Microsoft will really add to the online portfolio of services. Also selling episodes of popular TV shows such as 24 will add to revenue generating channels. Members can view these through the Myspace Movie portal.

Is anyone making money from Social Networking now?
Yes. Faceparty is a UK based company with several million members. They built up a community first, and then added the membership element. We are more used to the typical model adopted by bigger players such as friendster and Myspace who generate revenue by online advertising, not from membership. These sites can charge corporates for a featured profile that becomes visible to all members on various pages.

There are other more niche players trying to build communities such as FAQQLY.com – who enable their members to showcase their expertise. Also worth mentioning are Business Networking sites such as ecademy.com and linkedin.com who are gaining more traction in this lucrative environment. The business model here charges a fee for introductions and communications.

Do you see big differences in the US marketplace and the European one or are we all one global village?
From an investment and vision perspective there is a huge gap. Thanks to substantial investment from American companies this has transformed the Social Networking landscape into a different league which has spawned the success of Myspace and friendster.

A UK success story is WAYN “Where Are You Now” - a site for travellers to keep in touch with their friends and families. The team at WAYN together with the founders of Friends Reunited created a substantial impact in this popular niche and have grown membership massively. They are making a profit in this arena in a short space of time which is impressive.

What would make you sign up to a Social Networking site?
Having been a member of early Social Networking sites such as evite.com and other early flat online communities it is amazing how the technology and features have evolved in such a short period of time. Take Tagworld.com for example, which was introduced less than a year ago with good financial backing and a large development team. The concept is similar to Myspace, however the features are awesome and they already have over 2 million members. This is a great example of the next generation of Social Networking sites and really excites me.

What are some of the pitfalls?
1. Insufficient investment
2. Experience/marketing
3. Content/Safety

If you are planning on developing a Social Networking site you need to be prepared to invest in development or you will be eaten alive by the quality and functionality of the bigger players. There are Social Networking companies who have spent time developing platforms, collecting knowledge and experience over time which allows them to offer up-to-date ‘bleeding edge’ Web2.0 functionalities for much less investment than previously – but you cannot underestimate how quickly this market is evolving.

The issue of content and safety is also a crucial one. The US House of Representatives has already passed a law restricting Social Networking sites at school and libraries to prevent pedophile grooming. This is going to become an increasingly important area and one to watch.

Where do you see the Social Networking landscape moving to in 10 years time?
As a Social Networking nerd, I’m as curious as you are! It astounds me how Social Networking has grown massively in the last two years, to the extent that Myspace, friendster and Facebook have become household names. In Scary Movie 4 Myspace was mentioned by one of the characters which shows how it has been picked up by the mass media.

We are seeing more cross platform integration, mash-ups and widgets – where you can port your identity around the web. One example is flickr, a simple idea of uploading your photo and being able to send the URL to your friends to view. You can also grab the code of the widget and paste it onto your own blog, profile or personal site.

Sound and Movie clips such as Podcasts and Vodcasts, which you can share with your friends on different Social Networking sites are the next phase. You can already see YouTube and other sites offering a similar service becoming very popular. NBC is planning to show promotions of their next seasons shows on YouTube. However the majority of content right now is coming from members themselves. You can already view online pop idol sites where visitors can vote for sing-along karaoke clips. It will enable the truly great and the truly awful to access a huge audience.

Already, we are seeing Social Networking moving away from the PC and working through mobile and other devices. There are even gadgets that will alert you when you walk past someone within your network, or mobile phones that provide a list of members within your local area.

I believe we will also see further legislation within government relating to the use of Social Networking, especially with regards to children, which will no doubt increase the visibility of Social Networking within the press; resulting in more open debate.

So a prediction for 10 years time? It’s impossible to say - I don’t even believe we have scratched the surface of the possibilities…