Social Investors Seek New Niche Networks Can the Next Big Thing be found on a small scale?

Investors, users and, more importantly, advertisers are on a constant hunt for The Next Big Thing. With LinkedIn trading publicly and Facebook’s IPO around the corner, it’s no surprise cool hunters are hungry for another big social play.

“Investors are asking, ‘What are other networks of people?’” said Seth Sternberg, CEO and co-founder of Meebo. “LinkedIn owns the professional network. Facebook owns the friends network,” he said. No one expects an up-and-comer to supplant the category leaders, so instead, market watchers are looking to niches beyond “professionals” and “friends.”

The problem with a niche, of course, is just that: It’s a niche. Facebook and LinkedIn succeeded because of their scale; aiming for a limited audience is less attractive. There are already scores of small niche players that are likely doomed to toil in obscurity. MuggleSpace, for example, bills itself as “the ultimate Harry Potter Social Network.” Ravelry serves the knitting community. NaturallyCurly Network, “the leading social network for people with curly, kinky and wavy hair,” managed to secure $1.5 million in venture funding last year.

Big money, in the form of ads and investments, will go to the social media categories that think big. Gaming is one. Last week IGT acquired Double Down Interactive, a two-year-old maker of Facebook games, for $500 million. Neighbors is another, with recently launched Nextdoor, Yatown and Home Elephant competing to forge the most local connections. Interest-based communities, which include stuff-lusting women on Pinterest, curious techies on Quora and self-improvers on Mightybell, serve potentially huge audiences.

Ironically, the one common theme with fast-growing niche social networks is their reliance on Facebook. Since the highest friction for a site is luring people to sign up, new networks must use Facebook Connect, allowing (or, in the case of Spotify, forcing) users to log in with their Facebook accounts.

It’s proof that Facebook’s primary function has moved beyond being a social network; it’s now a “layer of sociability,” according to Clara Shih, CEO and founder of Hearsay Social and author of The Facebook Era. But a Facebook layer is no guarantee of critical mass. “Facebook Connect can lower the barrier for niche networks, but they really have to offer something Facebook doesn’t already do, in a newer way,” Shih said.

(Source: http://www.adweek.com/news/advertising-branding/social-investors-seek-new-niche-networks-137541)