Year End - Social networks struggled, thrived in 2007

The year closes with the market in a fascinating state of flux.

High drama enveloped social networking companies during 2007 as they pursued significant opportunities and stumbled over mighty obstacles.

As the year draws to a close, many crucial questions about the good and the bad of social networks remain unanswered, with the market in a fascinating state of flux.

Will social networking sites fulfill their potential to become major and vibrant advertising vehicles? Or will they fall short if privacy concerns about intrusive and stealthy ad tracking drive users away, and if illegal and vulgar content scares off advertisers?

Another cliffhanger that 2007 leaves us with: Will social networking sites displace portals and search engines as users' preferred Web hubs? Or will users sour on the social network experience if they feel vulnerable to criminals and stalkers at these sites?

One thing that did become clear in 2007 was that the social network format, originally a hit with teens, has struck a chord with users of all ages, and thus these sites now harbor greater ambitions than simply being virtual meeting places.

"This was the year in which social networking gained legitimacy and credibility as a phenomenon that's here to stay and that's a big deal," said industry analyst Greg Sterling of Sterling Market Intelligence.

Sites such as Facebook, MySpace, LinkedIn and Bebo -- along with many others that sprouted up to cater to specific interests and demographics -- found they could offer most services, content and applications their users are interested in.

That's why most major social networks have opened their platforms, as Facebook did in May, so external developers can create applications for their sites. Facebook now has more than 7,000. For users, it's not just about communicating with friends but about possibly making their social network profile their most important and relevant Web page.

"The major development in 2007 was the emergence of the social platform: It's the evolution of social networking from a closed application that is fixed and defined by the vendor to an extensible platform that can support an ecosystem of third-party vendors," said Ray Valdes, a Gartner analyst. "It accelerates the evolution of these sites and allows them to address a wider range of requirements: different types of users and of usage scenarios."

As this became amply evident in 2007, Internet giants such as Google, Microsoft and Yahoo reacted uncomfortably, seeing sites such as Facebook neatly solving a problem that has stumped them: providing their users with a unified experience across their different online services.

Google, Yahoo and Microsoft for years have provided services for hosting photos, videos and blogs and for communicating via e-mail and instant messaging, but they have failed to find an efficient, organic way to tie them together. At a site such as Facebook, these services orbit around each person's account. Google, Microsoft and Yahoo all launched social networks in recent years but didn't make them the center of their online services universe.

Now, Google, Yahoo and Microsoft are scrambling to unify their consumer online services, retroactively attempting to stitch a social network across them.

"The social platform allows the application to evolve and adapt and be integrated with other applications. The user will log in to their profile page and see they have new messages, or a photo has been uploaded, so [the profile] becomes the new center of gravity for the person's Web experience," Valdes said.

This year, Yahoo said it would phase out its disappointing Yahoo 360 social network and it began experimenting with a new one called Yahoo Mash, hoping to mesh its services together. Meanwhile, Google launched its OpenSocial common APIs for social networking applications, a move some consider an attempt to undercut the momentum of Facebook's development platform. Google also has launched Google Profile, a service to give people a single badge to tie together their Google services.

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Juan Carlos Perez

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