Interesting article out in The Economist this week, which talks about the future of social networking, and Facebook in particular. The central thesis is that aspects of social networking will become ubiquitous as time goes on, but that like web-based e-mail, it’s not something that has much of a business model or a possibility for monetization:

Web-mail has certainly not become a business. Admittedly, Google, Microsoft, Yahoo!, AOL and other providers of web-mail accounts do place advertisements on their web-mail offerings, but this is small beer. They offer e-mail—and volumes of free archival storage unimaginable a decade ago—because the service, including its associated address book, calendar, and other features, is cheap to deliver and keeps consumers engaged with their brands and websites, making users more likely to visit affiliated pages where advertising is more effective.

Social networking appears to be similar in this regard. The big internet and media companies have bid up the implicit valuations of MySpace, Facebook and others. But that does not mean there is a working revenue model. Sergey Brin, Google’s co-founder, recently admitted that Google’s “social networking inventory as a whole” was proving problematic and that the “monetisation work we were doing there didn’t pan out as well as we had hoped.”

—article continues—

Furthermore, the idea that there will be one site where one goes to check in on a particular network will be a thing of the past:

“We will look back to 2008 and think it archaic and quaint that we had to go to a destination like Facebook or LinkedIn to be social,” says Charlene Li at Forrester Research, a consultancy. Future social networks, she thinks, “will be like air. They will be anywhere and everywhere we need and want them to be.” No more logging on to Facebook just to see the “news feed” of updates from your friends; instead it will come straight to your e-mail inbox, RSS reader or instant messenger. No need to upload photos to Facebook to show them to friends, since those with privacy permissions in your electronic address book can automatically get them.

A commentary on the article can be found here, which agrees in general with the premise presented, but thinks there’s profit to be made for Facebook despite this, if they play their cards right.