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Last week in this space I asked whether the economic crisis might actually be good for Web 2.0 and online social networking. Others were asking the same question, and already we are getting a clear idea that the answer may well be yes.
My first question was whether the economic downturn might force companies to get over the Web 2.0 fear factor and take the Enterprise 2.0 organizational model seriously. For corporations guilty of Web 2.0 foot-dragging, there is good news on the price of implementing change. According to a report by Forrester Research, the price of collaboration software tools (wikis, blogs, social networks, etc.) is plummeting dramatically as they become commoditized. Competition amongst makers of Enterprise 2.0 tools, like Microsoft’s SharePoint, is driving prices down.
That may not be good news for software suppliers, but as prices are falling corporate take-up is increasing. Here is how Forrester’s Oliver Young describes it: “The enterprise Web 2.0 market is experiencing an explosion of activity among enterprises seeking collaboration and productivity improvements.”
In an article by Jon Swartz in USA Today, analyst Kevin Martin from the Aberdeen Group observed: “Companies are asking, ‘How can we make our work force more productive?”‘ In the same article, Gina Bianchini, CEO of the social networking site Ning, said: “There’s been a definite shift the last two months. There is a genuine interest now rather than a casual curiosity before.”
If this trend continues, the Enterprise 2.0 model may finally become an organizational reality.
MBA schools, meanwhile, are expecting to be beneficiaries of the economic downturn, as out-of-work executives from the financial and other sectors opt to upgrade their credentials during hard times. According to this article in the International Herald Tribune, business schools are expecting a flood of applications for next year. For unemployed executives who don’t enroll in business school, many are already spending numerous hours logged onto social networking sites.
That was my second question last week: whether the crisis will be a boon for social networking sites like LinkedIn, Ning, Plaxo and Facebook. The answer is unequivocally positive. For these sites and others, the economic crisis represents a windfall opportunity as worried employees rush online to plug in to social networks and attempt to reinvigorate their social capital. While phone calling and face-to-face lunching may not be entirely out of fashion, many are activating their networks online.
As the New York Times reported last week, “if you’ve been joining social networking sites and never taking the time to complete your profile — or if you’ve been hitting the delete button when friends and colleagues invite you to connect on a new online platform, now is a good time to start paying more attention.” Not only laid-off investment bankers are rushing onto social networking sites, but employees and professionals from virtually every sector of the economy are becoming more alert to the advantages of maintaining an online network.
With so many people stampeding onto online social networks, the delicate matter of proper etiquette and good form will doubtless be an issue. It becomes especially problematic when social networking extends beyond close ties, which can be defined as relationships based on frequent contact, emotional closeness, and a history of reciprocal favours. How are we supposed to behave when building social capital vis-à-vis people with whom we have only infrequent contact, no emotional closeness, and no history of reciprocal favours?
In Throwing Sheep in the Boardroom, a recurring question is whether social interaction in the virtual world is governed by unique values, codes, and laws of conduct. In many instances, there is reason to believe that the virtual world does indeed have its own normative frame of reference. Yet tension with real-world values is often inevitable.
In the New York Times article cited above, novice online social networkers are cautioned that, even on sites like LinkedIn, old-fashion networking rules apply. Some of the proffered advice makes sense, such as this tenet: “Build your reputation as a giver, rather than as someone who is always asking for favors”. There is indeed nothing more irritating, even on a strictly professional site like LinkedIn (as opposed to Facebook which has an essentially social dynamic), than when a new contact comes back to you almost immediately with an inappropriately forward request for a favour. It’s always more advisable to go into social networking as a giver, not a taker — and gradually build relationships according to reciprocated favours. Online social networking is governed by a culture of sharing, not selling.
As I noted last week, it will be interesting to see if the sudden influx of career-motivated networkers on social sites — especially Facebook — will create tension as self-interested impulses clash with established codes based on “social” interaction. If so, it may put further strain on the notion of an online ”friend”. We may find ourselves asking more frequently that old question: “What are friends for?”

Is it possible that the global financial meltdown may actually be good news for Web 2.0 social networking?

By most accounts, the economic crisis won’t spare Silicon Valley or the high-tech sector. eBay has announced layoffs, and there are rumours that Yahoo is about to push a large number of employees out the door. IT software spending at many corporations is bound to decline. Some are even comparing the current climate to the high-tech bubble bursting eight years ago. 

But let’s look at the potential upside.

First, perhaps the financial crisis will force corporations to give serious consideration to putting into practice, instead of merely talking a good game, Web 2.0 strategies aimed at harnessing the productivity advantages of horizontal collaboration and open innovation. With pressures to rationalize operations, maybe now is the time for making a solid “ROI” (return on investment) case for Web 2.0. Perhaps Enterprise 2.0 is finally about to shift from evangelist vision to executed strategy

Second, an intelligent working hypothesis would be that social networking sites like LinkedIn, Plaxo, Ning — and even Facebook — will see their membership ranks soar in coming weeks and months as widespread insecurity drives people to connect with others to boost their social capital. A cynical way of putting it would be: “misery likes company”. Still, there can be no doubt that, as people worry about their financial security and career situation, many will feel motivated to plug into social networks. Anxious about their institutional status inside vertical hierarchies, people will turn to the social dynamics of horizontal networks.

On this second point – which is my main concern here – empirical data already appears to validate this hypothesis. In the spring when petrol prices were spiking, Neilson released findings that suggested people were networking online to “cope” with hard economic times. LinkedIn meanwhile has been boasting soaring membership numbers, reaching 28 million worldwide. Nobody will be surprised to learn that many of LinkedIn’s new sign-ups are coming from the financial sector, whose membership has doubled. It may be hard to feel sorry for bonus-bloated investment bankers on Wall Street and in London’s City, but many are frantically dusting off their CVs and rushing to online social networks in the hope of repositioning their careers.

A new LinkedIn survey has revealed that 42% of the network’s members feel their job security has been impacted by the economic crisis, while 13% say it’s too soon to tell. In other words, more than half of LinkedIn’s worldwide membership is scared.

But is joining LinkedIn really the answer?  Or as BBC tech blogger Rory Cellan-Jones put it: “It sounds pretty desperate to me — and I still fail to see the attraction of a network where everyone is only interested in what you can offer them, rather than what you have to say.”

Cellan-Jones’ comment underlines two fundamental tensions that we analyze in some detail in Throwing Sheep in the Boardroom. The first is the tension between rational and non-rational motivations to belong to social groups. The second is the tension between “close” and “weak” social ties.

Motivations for joining social networking sites are varied and complex. At risk of oversimplifying, we can classify motivations into two broad categories: rational and non-rational. Professionals who join sites like LinkedIn are primarily motivated by rational calculations related to their career interests. Most teenagers who collect “friends” on MySpace, on the other hand, are not looking to improve their career prospects. Their social interaction is motivated primarily by a non-rational instinct to forge social bonds.

The classic conceptual dichotomy for these two impulses comes to us from 19th century German sociologist Ferdinand Tonnies: gemeinschaft versus gesellschaft.  Loosely translated, gemeinschaft describes “community” identification based on common values and close bonds. Gesellschaft, by contrast, describes rational forms of association based on self-interest. MySpace is largely a gemeinschaft social networking site; LinkedIn is essentially a forum for gesellschaft interactions.

This dichotomy is complicated by an intriguing paradox. Most of us like to feel connected to others through close-knit ties or shared interests and passions. Yet in truth, we frequently depend on people with whom we maintain only “weak” ties – especially when we are looking for a job. The strength-of-weak-ties theory was famously elaborated by American sociologist Mark Granovetter. He defined “weak ties” as social relationships characterized by infrequent contact, an absence of emotional closeness, and no history of reciprocal favours. In professional parlance, you might say people in your “extended network”.

Granovetter found that we rely on “weak tie” connections much more often than we think. Most intelligent job-seekers don’t turn to close friends or family for jobs, unless they are expecting to benefit from the advantages of cronyism or nepotism. Most turn to their extended network. And most business networks are based on relatively “weak tie” associations.

Which brings us back to the economic downturn. When out-of-work investment bankers scramble to sign up to LinkedIn, they are making a rational calculation. They’re not looking for friends; they are seeking to leverage the strength of weak ties.

What happens, however, when people start invading Facebook – where “friend” values are embedded in the site’s social etiquette – to network for career reasons? It’s easy to see how a tension between gemeinschaft instincts and gesellschaft calculations could create some social conflict on Facebook. And yet Facebook is cluttered with self-promoters, career artists, and marketing entrepreneurs. Can these people really be considered “friends”, even when defined as “weak” ties? Just how many Facebook “friends” can we reasonably have anyway?

Anthropologists tell us that it’s impossible to maintain stable social relationships with more than 150 people. This is widely known as “Dunbar’s Number“, named after British anthropologist Robin Dunbar, who argued that the necessary ritual of “social grooming” breaks down in groups whose membership exceeds roughly 150. Interestingly, the social networking site, Friendster, originally capped the number of any one member’s “friends” at — you guessed it — 150.

If we apply Dunbar’s figure to all social networking sites, any “friend” list that exceeds 150 is not credible — and pushes social networking into the zone rational calculation. Maintaining a professional network of more than 150 connections on LinkedIn might be plausible, but it would appear to be humanly impossible to maintain social relations with more than 150 different people. And yet many Facebook profiles — including mine — feature “friend” lists that not only surpass that figure, but double, triple, and quadruple it. Some Facebook “friend” lists count in the thousands. Which leads to the question: is the virtual world exempt from basic laws of socio-anthropology?

While we ponder that question, it’s a safe bet that the economic downturn will accelerate the trend towards a blurring between non-rational instincts to connect socially with like-minded people and rational calculations to build a social network for self-interested reasons.