Thursday, February 7, 2008

Social Apps Will Thrive In A Recession?

To echo Josh Bernoff's disclaimer, I'm not an economist, but I'm pretty sure I don't agree with his reasoning in this Groundswell post (and I may be wrong but I think the Tech Wreck was well underway before September 11).
I do agree some things are different now -- one key point Josh doesn't mention is that on-line advertising is far more mature now, and so capable of demonstrating value, than it was in 2000.
But it looks to me like Josh is asking the wrong question. It's not whether or not Facebook etc will do well in a (US) recession but whether investors will continue to put money in at the same pace.
People didn't stop using email after 2000 and I suspect they wont stop using social networking tools now (incidentally, Mark Jones at Filtered had a great post about what's next, Email 3.0.)
But venture capital funding did become harder to get for Web businesses after the Tech Wreck and businesses did slow spending on new IT projects tools for a while afterwards.
In my view that's the challenge the social networking micro-economy is going to face if the US enters a recession -- a rapidly growing customer base at the same time sources of funding are becoming more risk averse.
And that's a recipe for currently those independant outfits being accquired by large IT and media companies I think-- just like after 2000 -- as they seek the protection of more finanically stable parents (witness the recent rumours re Digg).