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How Social Networks Became Useful

Best of 2006 Internetnews.com wades through the top stories and issues that rocked the industry in 2006 in this week-long series.

People flocked to social networks in 2006 in impressive numbers. And the money followed. You can credit broadband adoption for that.

It turned social networks from mere asynchronous communication platforms to communities where people can share the music, videos and photos they care about with their friends.

In June, MySpace became America's most popular Web site, representing 4.46 percent of all Internet traffic during the month, also according to a Hitwise.

By August, Yahoo's photo-sharing/social-network hybrid, Flickr, had over 4 million users and 200 million uploaded photos. And in September, one in 20 U.S. Internet visits went to social-networking sites, or double the number from the year-ago period, according to HitWise.

Following all that traffic came the cash.

In August, Google signed a $900 million deal with News Corp. to provide search and display advertising to MySpace users. Soon after, Microsoft announced its own ad-serving deal to provide display advertising on Facebook pages.

The marketing dollars aren't supposed to slow down anytime soon, either.

According to a November eMarketer report by senior analyst Debra Williamson, 2007 ad spending on U.S. social-networking sites will jump to $865 million from $350 million in 2006 a close to three-fold jump. By 2010, the report estimates, spending will reach $2.15 billion.

And back in 2006, social-network valuations sky-rocketed accordingly.

There was the $800 million acquisition offer from Yahoo that Facebook reportedly rejected, the $2 billion Facebook wanted and the $25 million in venture capital Facebook got from Greylock Partners in April. In September, RBC Capital markets analyst Jordan Rohan said MySpace might be worth $15 billion in three years. The same month, Google bought video-sharing site YouTube, with is social features such as profiles and friends lists, for $1.6 billion.

You can credit a number of factors for the visits and the money, but start with ever-increasing broadband adoption in the U.S. According to Nielsen//NetRatings, 78 percent of active home Web users connected via broadband during the month of November, up 13 percentage points from 65 percent of active Web users a year ago.

Better connection speeds at home make sharing video, images and music online possible. And there's evidence to suggest that they way social networks facilitate sharing video, images and music between friends is what finally made social networks useful.

This is one way their popularity reached such heights in 2006. Sure, mapping your offline social network online is fun. But uploading party pictures and tagging them with your friends' names so that they will automatically see them the next time they sign on saves time, postage and paper. It's useful. It's better than before.

Social networks understand that being more useful leads to more use. Just look at where the networks are investing to improve their products. Piczo, BeBo, and hi-5 have partnered with a company called VideoEgg to provide video editing, uploading, and display tools for their users.

"This generation that's claiming the Web, they are very photo, video and music driven. That's how they express themselves. They are not scared of technology, of getting a photo off their phone and up on their Piczo or MySpace site," Piczo CEO Jeremy Verba told internetnews.com.

Market leader MySpace is also investing in helping its users share media. Nearly 20 percent of all July 2006 MySpace traffic went to its music search page, according to Nielsen//NetRatings. To take advantage, the News Corporation property partnered with Snocap in September to provide digital music retail tools for MySpace users.

Facebook spokeswoman Melanie Deitch told internetnews.com that in late 2005, Facebook added a photo-sharing feature to its site. She said that since then, members have uploaded more than 4 million photos a day, making Facebook the No. 1 photo sharing site on the Web.

For its version 3.0, the small but quickly growing social network Multiply.com emphasized the development of digital media-sharing tools for its users. CEO Peter Pezaris told internetnews.com Multiply did it to answer a growing user need.

"There are a hundred million digital cameras going to be sold this year and almost all of them can take video," Pezaris said. "The market for helping the everyman share digital content is the biggest market of all."

So expect to hear more about social networks in 2007, but it won't be because teenagers are messaging or meeting new friends online. Those online activities are around for good.

But no one is going back to mailing grocery store-developed photos or reel-to-reel film editing anytime soon. Not after experiencing the quick and rather easy sharing activity of sharing video, photos and music with friends and family online.