Social networks poised to shape Net's future

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LAGUNA BEACH, Calif.--Social networks, mobile video and "Googlism" will continue to transform the Net in years ahead, Piper Jaffray analysts said Monday at the opening of its annual Global Internet Summit.

"The Google revolution is not over yet," said Safa Rashtchy, managing director and senior analyst at investment firm Piper Jaffray, referring to a fictional term, "Googlism." The search giant "has been inspiration for many new companies," as well as changing how many companies are formed today, he said.

Rashtchy opened the three-day conference here by highlighting current Internet trends. The conference, in its second year, is focusing on several topics, including entertainment, advertising, international markets and social networks.

Social networks, for example, are poised to shape the Internet's future, Rashtchy said, despite some skepticism about how they will make money. Social networks such as MySpace.com are already challenging traditional portals. MySpace, for example, has surpassed MSN and AOL by measure of monthly page views, Rashtchy said, and its traffic equals roughly 75 percent of Yahoo's, the No. 1 site on the Web.

James Lamberti, a research analyst at ComScore who spoke at an opening panel, marveled at the rise of MySpace, which attracted 50 million visitors in March. "Google did not grow this way--it was much slower over time," he said.

Yet other panelists openly questioned how and if these companies make money, comparing the frothiness around social networks and video sites like YouTube.com to the height of the Internet bubble.

Growth opportunities within the market will be for niche communities targeted at middle-age or young Web surfers, Rashtchy said. For example, a host of family social-networking sites have cropped up already. Rashtchy suggested that Yahoo and other portals may have to team with MySpace and others to attempt to direct their mounting influence among Web surfers.

One overarching issue, Rashtchy said, is that online advertising dollars continue to lag behind Internet usage in the United States. Roughly 172 million Americans visit the Web in a month, according to ComScore, but online ad sales, expected at $16 billion in 2006, are still a small fraction of the hundreds of billions of ad dollars spent annually. In the next 10 years, this gap will close, but the spending will likely never be equivalent, Rashtchy said.

For that reason, content and communities are corners for investment and growth, Raschtchy said. The advertising gap will not likely be closed by blogs or social networks, however, researchers said. That's because blogs may contain unsavory material that marketers often don't want their products to be associated with, they said.

Mobile devices are another growth opportunity, Rashtchy said, and video will be a particular complement. "This is going to get big, folks," he said.

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