(Editor's note: With social networking company MySpace one of hottest companies on the Web, investors are asking how MySpace became such a success. Was it luck, or are there certain ingredients you can throw into a social network business strategy to ensure better adoption? Raj Kapoor, venture capitalist at Mayfield, takes a crack at answering.)
There is no doubt social networks are here to stay. Adoption has taken off -- Myspace is a shining example with over 107 million accounts growing at a staggering 230,000 per day.
There are other companies that seem to have veered off course and grown uncontrollably, in unpredictable directions. Take Friendster: At first, it grew strong in the U.S. as the early leader and then was saddled with excessive downtime and lack of features/functions -- but as these issues were fixed, the site took off -- mostly in the Phillipines. Orkut faced a similar trajectory: An early social network clone started by the invincible Google captured the US digerati's attention, and then slowed down in the US and became a market leader -- in Brazil, that is. Rumor is that 11M of their 15M users are in Brazil (a country with roughly 32M internet users). Fotolog (a photo blog) is another example - massive usage - but primarily in South America. Finally, there's Bebo -- which has practically cornered the youth market --- in the UK.
This was probably not a master plan for any of these companies -- why does it happen? It has to do the with the viral propagation of these networks. In Malcom Gladwell's Tipping Point language, they stumbled upon a few "connectors" at the right time in these countries and these connectors spread the virus quickly and effectively (and locally since a social network starts out with people you know). Once the network started saturating a local market, new users in other regions that joined didn't find many people like them (e.g. mostly Spanish profile entries or photo captions) and chose not to remain active or spread the virus.
The multi-million (or perhaps billion) dollar question is - can these networks steer user adoption? So far, no one has pulled it off but Friendster is in the process and I'm sure it's top of mind for the others. Don't get me wrong. Dominating an entire country outside the US isn't a bad thing, but the users in these countries are tough to monetize. The big reward remains here in good old America. I think most social networks goal is to let the local users flourish but try to expand the reach to other regions.
It's not easy, not proven, but I believe it is possible to steer a social network. Here are some ideas that could help bring a network back on track:
1) Create a relevance engine showing the right users at the right time. For example, many networks display "recent" or "interesting" users when a user first joins - the goal of this is to get them socializing right away. Instead of randomly pulling profiles from the user base, the networks can regionally relevant users to the new ones in order to build engagement and further virality among the right group.
2) Do proactive seeding trying to find the "connectors" to trigger exponential growth. Just like there were a few Brazilians who were wildly social and popular and brought their friends into Orkut, a network needs to do some seed marketing (yes, that's a new word for most social networks that have zero customer acquisition cost) to bring in connectors (sometimes through trial and error) and get them to start the flywheel in the right direction.
3) If all else fails, you can tune the virality up or down depending on the desired user group. How do you tune virality? The idea is to promote viral features such as "tell a friend" and "import your addressbook" selectively depending on the user group -- perhaps sacrificing short-term growth in non-relevant users.
Again, I think we will see some real-time experiments pan out as various social networks try to shape their destiny. To be clear, if the site doesn't have great features, is unstable, or if the user base is already saturated (which may be the case with 18-35 year olds on Myspace in the US), the above may not work. This is a brand new field but it's clear it's not just about serendipity. Knowing your customer and analyzing the wealth of customer data along with levers of growth can change the odds.