Every gold rush creates a plethora of companies which then consildate into a smaller, more manageable number. In 1999 and 2000 we saw the emergence and disappearance of many dotcom businesses. Some went bust too fast, others got off the ground but struggled to retain the finance needed to stay the course towards breakeven. Many of the companies that disappeared were swallowed up by rivals – often for their technology.
In the current social media gold rush, we are seeing another slew of start-ups. Many are simply trading off the bigger boys like Facebook, offering complementary services to the platform, but some are standalone social networks hoping to carve their own niche.
We will see consolidation again. This will be fuelled by some companies failing, but it will also be fuelled, as always, by the larger players needing to retain or regain an edge over their competition. As well as acquiring companies for their technology or established customer base, however, social networks are rich in data, and I think it is this data that will drive take-overs.
Social networks are not just gathering data about registered users, but they are also building huge related profiles of their friends. These relationships could prove invaluable when added to a company’s existing data. Imagine what else you could do when you cross reference the data from two or three acuired companies.
Privacy campaigners will be worried and cynical, but I think it is inevitable.