Excerpt from an extensive review of Chris Anderson’s new book:
Bo Peabody, a venture capitalist and the founder of an early social networking site called Tripod, has since soured on the idea that they can make money. People won’t pay for any social-networking services, he believes, and ads don’t work. “Social networking is the most useful thing on the Web, but I don’t think it’s a particularly good business,” he says.
At the same time, while the explosion in computing power, storage, and connectivity has unquestionably cut marginal costs, some costs are proving more stubborn than others. Much of today’s online business involves people ordering things like shoes and books and microwave ovens, and those can never truly be free. And even online storage has its costs - Facebook has been struggling to find and pay for enough server space to fit all the information its voraciously networking users are uploading every day - it’s a problem that, for the foreseeable future, will grow worse, not better, as the network grows.