The launch of Orkut has re-ignited the debates about whether or not there's any money in this whole "social networking" game. More specifically, many folks wonder if a purely social networking company can make money without becoming part of a larger (Google, AOL, Yahoo, Microsoft, eBay) company.

I'm of two minds on this issue. First, this social networking craze is really just the beginning. The services we see today are too numerous and require far too much of our time, energy, and attention compared to the value they deliver. They're fads. They'll either evolve or die when then initial "gee whiz" factor wears off.

My other mind points out that the only social networking services offered by the big guys today (Instant Messaging) likely don't make any money either. If those companies decide to get in the game, they'll likely start with enhancements to their instant messaging and e-mail services while pouring bits of social networking goo into the rest of their offerings (shopping, job search, travel, etc).

The only thing I can't figure out is if this social networking craze is a "winner take all" scenario. Had you asked me about that during the very early days of IM, I'd have said something like "that's obvious, isn't it? We either need one big service that has 95% of the users, or 2-4 big services that all co-operate on some fairly basic level."

But clearly neither of those has happened. The IM market today is basically AOL, Microsoft, and Yahoo with roughly equal pieces of the pie (or so I'm told).

I really wish I knew the answer.

Late Revision

I was wrong. Though hard numbers are hard (or expensive) to come by, there is some data to indicate that AOL was in the 90% range in the year 2000.

While Yahoo and Microsoft have been the fastest-growing IM services of late, according to recent Media Metrix numbers, America Online's AIM and ICQ remain the team to beat. Together they comprise an estimated 90 percent market share, analysts said.

Anyone have more current data than that? No, I'm not gonna pay $2500 for the pleasure of knowing.

Now I'm left wondering why Microsoft and Yahoo even bother. Even Apple, the king of small marketshares, teamed up with AOL for their iChat service.

Even so, AIM doesn't require an AOL account, so my assertion stands. It probably doesn't make any money.

Another Update: See also Newer IM Marketshare Numbers.

Posted by jzawodn at January 25, 2004 02:29 PM

Reader Comments
# Derek said:

I'd love to see figures, but I'd strongly suspect that AOL holds *way* more than 1/3 of the IM pie.

I honestly don't even know a single person who uses MSN's messenger product. Almost every person I know who uses Yahoo's messenger product is someone I know from when I worked at Yahoo.

on January 25, 2004 02:40 PM
# Jeremy Zawodny said:

Well, I did say "roughly."

It really doesn't matter though. The fact that AOL has less than 80% (world-wide) proves my point.

on January 25, 2004 02:48 PM
# Jon Gales said:

I'd like to echo that "AOL holds more than a third of the IM market" statement. I have > 150 AOL buddies. I know 1 person that uses MSN and no one that uses Yahoo. To be fair, I'm sure if I buzzed my buddy list it'd be more like 150 AIM, 10 MSN and 5 Yahoo, but no where near a third.

There may be a lot of registered users for Yahoo and MSN, but you have to look at active users. When you sign up for AIM, you get AIM. Not the same with the other two (Hotmail for instance).

on January 25, 2004 02:49 PM
# Adam Rifkin said:

I want to echo what Jon said. I have accounts on ICQ, AIM, Yahoo, and MSN. My Yahoo and MSN accounts have about a dozen people each, my ICQ has 2 dozen, and my AIM has about 300 people. More (anecdotal) evidence.

And I agree with Jeremy, I don't think any company uses instant messaging to make money. It's a loss leader to enhance brand, as best as I can figure.

on January 25, 2004 05:42 PM
# JJ said:

It's not only a matter of numbers; it's also important what they will make of those numbers and how they will make money out of them. It's not only a matter of "create value by bringing people freely, and, when there are enough, start charging them"

on January 25, 2004 11:34 PM
# Marc Canter said:

What we call social networking today will be a feature - and represents the 'raising of the bar' - as we saw multimedia due at the turn of the decade before ('89-'91).

Social networking is currently being built into business networking, dating and jobs/classified ad services. Soon they'll be part of portal and managzine sites.

Next comes family management systems.

Dudes - it's all happening in front of our eyes.

on January 25, 2004 11:55 PM
# Jonas M Luster said:

Not quite along the marketshare question, but the whole Orkut deal has me thinking about Social Networks a lot, recently. The thing that edges me on most, about them, is not so much their existence, but the fact that each and every one is touted as something new. They aren't. Neither are they creating anything that hasn't been there, before. It's a bunch of more or less working tools to visualize existing relationships. The emergence of people who now claim they'd created or helped create something new, is the truly distressing fact. That, and the VCs and pundits buying in to it.

As a complete aside, the oldest social network spanning wider ranges than just a village or similar is the network of a French dove breeder club. It exists since the late 17th century. I wrote about it here.

on January 26, 2004 12:00 AM
# Dirk said:

IMO it's about consumer profiles. If you have them, market share is not as relevant as one might think as long if you have "a lot of them".

on January 26, 2004 06:34 AM
# Nuno said:

Here in Europe numbers are really different than yours on US. Here Messenger is really the "top banana". In 50 people that use these services, I know 48 with Messenger, 2 with ICQ, 0 AOL and 0 Yahoo. I have an ICQ account for almost 6 years, and I switched to Messenger some months ago, because of all itīs popularity. I could use Trellian or something, but I donīt bother.

on January 28, 2004 07:01 AM
# Jarryd said:

In light of the plans of Microsoft and Yahoo announcing an agreement likely to commence the beginning of next year to enable msn and yahoo messenger users to cross-communicate, I guess there could be a much bigger unforseen possibility of social networks which on one level compete, yet on others complement one another.

on October 22, 2005 10:51 PM
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