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Alarm bells

As we've written here before, user growth, or rather a swelling database of email addresses and demographic data, is all that these web 2.0 "businesses" have to show show for their hyping, venture capital, betas and presentional kung-fu.

There are early signs that a rot may have already set in. The latest comScore figures show that users are spending less time on Facebook, MySpace and Bebo. For all three that's a bad sign, since the primary service they provide users is a place to waste time; a popular opiate that hardly inspires loyalty.

The deflation of the hype bubble at the public end might not be so potentially damaging if it weren't for the fact that these online procrastination services have so far failed to build a meaningful business at the other. Facebookplans for its cash flow to run $150m in the red this year.

Meanwhile Google's $900m exclusivity deal to serve contextual ads on MySpace, signed 18 months ago, isn't working out like Larry and Sergey hoped. In their last earnings call, Brin said: "I don’t think we have the killer best way to monetize social networks yet. We have had a lot of experiments and some disappointments."

That statement should ring alarm bells in the web 2.0 strategy boutique - at least for the founders who haven't cashed out with a quick sell-off. Google has been able to make vast pots of cash targeting ads based on web searches and emails.

A week later, when asked about Google's struggles to make money from MySpace, News Corp COO Peter Chernin responded: "Clearly our revenue from Google is guaranteed, so that’s not a particular issue for us." However, that guaranteed revenue stream expires two years from now. Little surprise then that Rupert Murdoch is reportedly happy to offload MySpace in an attempt to block Microsoft's Yahoo! takeover.

If the Digger does give the bid the bum's rush, the hordes of bloggers speculating on the minutae of the Microsoft-Yahoo! negotiations have decided that Ballmer should swoop for the 98.4 per cent of Facebook it doesn't own. By Redmond's own maths that would cost $14.76bn, and do wonders for Facebook's cred, no doubt.

If a movement to quit Facebook takes hold and stymies its member growth - its only vaguely tenable claim at being a business - you can bet not even Microsoft's corporate desperation to "get" the web will deliver that kind of payday to the greedy Valley VCs.

Maybe in ten years' time we'll look back at 2007's "Facebook phenomenon" hyperbole and laugh*. Or not. Perhaps it'd be better if we act like it never happened, just like we do now another lemming-esque popular psychosis that gripped the UK ten years earlier. ®

*In this case look out for the Reg web 2.0 commemorative plate collection.

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