“A visit from the pope may attract a large audience, but it’s not a great place to make money,” he wrote last month in an op-ed in the Washington Post. “Likewise, social networks can successfully bring people together, but don’t expect them to turn a profit.”
Peabody should know, as he goes on to explain. In 1995, he founded one of the Internet’s first social networks — Tripod — which by 1998 had become the eighth largest site on the Web. But even though users flocked to Tripod, advertisers failed to follow.
“Advertisers need to be sure that they are reaching the right audience with their message,” he wrote. “They have more assurance of this on search engines such as Google or content sites such as WebMD, where information is controlled and organized…But on social networks, users can post anything they want.” And they did — in a meeting with a top advertiser, Peabody remembers pulling up a picture of someone’s condom collection.
Charging for Tripod didn’t work either, so Peabody eventually sold it to the search engine Lycos, worked there for a couple of years and moved on. As a venture capitalist, he’s invested in ad and content networks — collections of sites like Waterfront Media that are organized around specific topics and try to take advantage of how people search.
“When humans get on the Web, they’re either looking for information, which lands them at places like content networks, or they’re looking for people, which lands them at social networks,” he said in an interview last week. “When I went to build my thesis for investing other people’s money, I decided to swear off social networks and focus on content networks.”
Waterfront Media, a healthcare network, is profitable and claims a $100 million annual run rate. As for Twitter — and Facebook — the entrepreneurial community should learn from the dot-com bust, recognize their value to society and turn them into non-profits, Peabody says.
“Imagine a world…in which I could not use Facebook to share hundreds of pictures of my infant son with his grandparents, and the citizens of Iran could not use Twitter to challenge their political system,” he wrote.
Twitter.org? Its investors must be shuddering.