Do Social Networks Follow the Traditional Business Cycle

Last night I returned home to see a post by Jeremiah Owyang about online community best practices. Included in the post was the following image of the life cycle of a successful online community:

If you take a look at this graph you may think, wow this is definitely how I’d like my community to end up. My immediate response was “is this possible?” Thanks to “continual improvements” these online communities appear to have continued growth even past the standard maturation phase of the business. If you’ve read “Crossing the Chasm” by Geoffrey Moore you will immediately realize that this chart makes no logical sense.

When selling a client on why to invest in building an online community this chart is extremely useful yet it doesn’t make much sense that once the community matures it continues to grow. Back in August of last year Alex Iskold questioned if it is time to rethink the “Crossing the Chasm” phenomenon. The Chasm that Moore speaks of takes place between the early adopters and the “early majority.” This is where most businesses fail supposedly.

The chart that Owyang provides appears to ignore the chasm phenomenon and instead focuses on those communities that have been successful. My biggest concern with his chart is that it defies traditional logic. Even after the early majority have adopted the product (or community in this case), it continues to grow. Perhaps this is why Warren Buffet argues that creating a valuation for an internet business is completely ridiculous.

While valuation in internet businesses may not be completely ridiculous, suggesting that a community will grow indefinitely is absolutely ridiculous. My guess is that the length of analysis on this report is not long enough or suddenly online communities have defied business logic. Where do you think the truth lays in this circumstance?

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