Can social networking sites do the business?

It’s not what you know, it’s who you know, and in business that’s always been true. Most deals result from referrals, recommendations or informal networking. We’ve had LinkedIn for years, a kind of a ‘friend of a friend’ recommendation system, but with the rise of MySpace and Facebook, there are lots of new social networks targeting business users.

In February, the Financial Times announced that it’s setting up an exclusive social network, for which members will be expected to cough up £2,000 per year. They’re vetting applicants and say they’re only interested in members at the level of CIO or board member. There’s a big question around whether people at this level have the time or inclination to take part. I’m sure they’d rather be skirting around a delicate negotiation on the golf course than poking a prospect online.

There are two new sites too, which both add social networking and Web 2.0 features to a business directory. Brownbook provides a tag-based front-end to its directory, invites users to submit reviews on suppliers they’ve used and incorporates Google Maps. Most content is provided by the site, but if businesses want to claim their entry and provide more detailed information, it’ll cost them five pounds per year.

Wecando.biz works by asking customers to provide endorsements for businesses, which can either be public or pointlessly private. Listings are free, but premium features will be launched later.

At this early stage, it’s hard to tell how successful the sites will be. They seem to be caught in a trap: until the sites reach critical mass, they won’t be much use to anyone. And until they’re useful in driving business, nobody’s going to pay them too much attention. One problem is that you can’t easily tell genuine reviews from puff pieces planted by the companies themselves, or their friends and families. Wecando.biz doesn’t appear to enable you to check what other companies someone has reviewed, which would make it easier to see if they’re genuine. On Brownbook, most contributors we checked had only reviewed one business. Ebay and Amazon have both taught the market that the level of participation in a community is a good way to judge how reliable someone’s reviews and feedback are.

The other problem is that these sites will be of most interest to smaller businesses, the kind that get business from phone books. Many small businesses, such as plumbers, still don’t have websites and so are unlikely to be motivated to encourage customers to write reviews. I can’t imagine how stunning a plumbing job you would have to do for someone to write a review of it without prompting.

The sites have been launched under the optimistic assumption that if they built it, the members will come. But it’s the content that really creates the value, and it will be interesting to see whether the sites can encourage enough users to join, and whether these start-ups can beat off competition from the more established directory companies such as Yell. They already have a strong brand awareness and paying customer base. These new social networks will be hoping that even in 2008 it’s possible to ‘do an Amazon’ and usurp the market leaders.