How will social networks ride out the storm?

News from China (subscription required) is that the music sharing website 99.cn has shut down due to venture capitalists pulling funding because of the global financial crisis(GFC).

A survey also conducted in China has found that due to the GFC the most likely websites to fail are online video sharing websites, social networking service websites, life search websites, and Webpage game websites.

This brings me back to a previous post I wrote in the fall out of the initial Wall Street bank collapses. I questioned whether online social networks (OSNs) were a valuable place for people affected by the initial financial impacts. I found that there was considerable silence from employees affected by the bank collapses.

Without any psychological training I guess there are two schools of handling trauma, either bottle it up and get on by yourself, or share your experiences with others to confront your situation.

If the latter situation were to occur OSNs would be a perfect medium for coping with the GFC. But, it is looking like the venture capitalists are banking on the former situation and that those affected by the GFC will more likely revert to traditional methods of coping with trauma.

And I can't blame the VCs. While OSNs have been around in some form or another since the day dot for the Internet, the current incarnation of OSNs in the forms of Facebook, MySpace and the plethora Ning and KickApps networks are in their juvenile stages. The more I have researched social networks the more I have found that currently to the majority they are a novelty, something to share holiday photos and play games with.

I have found that there are two types of groups that have successfully formed strong and committed forms of OSNs: groups of people that have common strongly held beliefs and groups of technologically savvy people that may not have strongly held beliefs but are comfortable in trialling new technologies. While these two groups fuel the hype cycle and get plenty of media coverage, they are only a vocal minority.

This is the market in which the VCs are playing, and when times are tough, playing with a minority doesn't work. The old cash cows are needed to ride out the hard times.

So for me, I have to agree that OSNs have not permeated into the fabric of society - yet. The majority of the population has not had the fundamental shift in mindset that is required for someone to spill their deepest held thoughts into the public world via OSNs and the like.

I think that there are enough OSNs and community groups to keep the development of online culture growing, however if the worst economic predictions come true, I don't think that there will be enough momentum for OSNs to become the hives of conversation that they might well have been if we were a few more years down the track.