What Happens if Social Networking Stops Working?

To me, the most interesting news stories always seem to come out on Friday or over the weekend -- and the news agencies didn't disappoint.

On Friday, an article was published by Reuters which looked at a recent poll of 2,277 adults conducted by the Pew Research Center. The poll, conducted in April and May of last year, concentrated on people's interactions within social media websites. Needless to say, I found the results of this small sampling incredibly interesting.

Of those polled, a definitive trend was seen toward creative, more private, and actively managed profiles. Of the respondents, 63% noted deleting someone from their profile page, up from 56% two years prior, and 37% admitted to untagging themselves in photos, up from 30% in 2009.

Another independent study by the Polytechnic Institute of New York confirmed this trend. From March 2010 to June 2011, the amount of Facebook users hiding their friends list jumped from 17.2% to 52.6%.

Social media companies are really seeking two things. They want to keep the user active and involved with the site, and they want that user to interact and connect with other users so the best possible data can be collected about the user and his or her friends by the social media site. This way the data gathered can be specifically targeted at the individual user or sold to a third party.

But what if social media users begin clamming up? That trend is clearly already happening, and it could become a problem for businesses partnered with large social media networks.

Facebook, LinkedIn's (NAS: LNKD) professional user base, and Google (NAS: GOOG) with Google+, don't have a lot to worry about. Their platforms and user bases are so large that in order to become a member, users essentially agree to share their information.

The concern I have is for social media "cling-ons" that rely on user interaction to drive sales. Zynga's (NAS: ZNGA) Farmville could see a slowdown if the trend toward privacy continues. Being reliant on Facebook for 90% of its revenue, the move toward privacy could become worrisome.

Daily deal site Groupon (NAS: GRPN) could also have trouble finding its target audience. Not only does Groupon have to deal with the fact that its e-commerce platform has an extremely low barrier to entry, but it's already receiving daily deal competition from Facebook. If privacy settings continue to tighten, it makes targeting those 845 million users even more difficult.

Even Netflix (NAS: NFLX) , which is trying the best it can to make amends for a trio of errors last year, isn't immune. Netflix has integrated its advertising platform with Facebook and stands to lose a chunk of its target audience if privacy trends continue.

I'm likely premature in my worries, but it's never too early to be skeptical about the growth prospects of companies that are attached at the hip to social media users. It's definitely a trend that bears watching. Now if you'll excuse me, I've got a few privacy settings I need to check...

What do you think: Is the trend toward private accounts a genuine concern or not really a big deal? Share your thoughts in the comments section below with your fellow Fools.

Increasing privacy trends is not a problem for a company our top-notch team of analysts has discovered. Get your copy of " The Only Stock You Need to Profit From the NEW Technology Revolution ," and find out for free which company has our analysts excited.

At the time this article was published Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. He's a sucker for public profiles. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLongThe Motley Fool owns shares of Google and LinkedIn. Motley Fool newsletter services have recommended buying shares of Google and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's always in view of the public.

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Evan Aagaard

correction: "...and the WSJ"

February 27 2012 at 1:25 PM Report abuse rate up rate down Reply
Evan Aagaard

Clamming up? It's called social pruning. People are beginning to realize it's not a popularity contest, that the more refined ones social graph the better the overall social networking experience and the healthier the information diet. Jeez you guys at the WSJ are like a bunch of old hens trying to make sense of a touch tone phone. Why does no one in the financial press understand social media? Stop hiring grey hairs!

February 27 2012 at 1:24 PM Report abuse rate up rate down Reply