The current proliferation of social media sites is the most pervasive phenomenon on the Internet today. Not since the dot.com explosion has the there been an Internet trend that is so widespread in its popularity. The comparison with the dot.com growth is in fact one that is made by many industry observers, and while there are a number of clear similarities, there are also some important differences.

It is expected that by early 2008, all the various social media sites will have more than 230 million members. That number is predicted to grow until 2009, with a leveling off on the number of new members expected by 2012.

The combined revenue from these sites, which in 2007 reached almost $970 million, is estimated to balloon to a whopping $2.4 billion by 2012.

Membership growth in social media sites varies greatly from region to region. The Asia Pacific region accounts for the lion's share of users, with 35% of the total users expected by the end of 2007. EMEA accounts for about 28% of all users, North America follows closely with 25% percent, and the Caribbean and Latin America trails behind with 12% of all users.

With the inevitable crowding of the social media site industry, many observers feel that consolidation of the market is a sure thing. This has given rise to some predictions that the smaller individual social media sites will be swallowed up by the bigger players in the field. Some experts feel however that this is not necessarily the case. In particular, social media sites with a focus on special interests are expected to survive the trend towards consolidation.

The extensive hype and excitement currently surrounding social media sites is perhaps what inspires the comparison to the dot com boom, but in the midst of all the buzz, there is a certain degree of trepidation felt by many as well. While many investors are naturally excited about the potential of social media sites, the fact that these types of web sites have not been proven for the long term is causing some hesitation. The promise of riding on the wave of the next big Internet phenomenon is a tempting prospect, but it is tempered by the uncertainty of social media sites as a long term sustainable industry. The most cautious industry observers have even gone so far as to suggest that most social media sites would do well to hold off on an IPO for the time being.

The founder and chief executive of Facebook, Mark Zuckerberg, has officially stated that despite his company's spectacular growth, Facebook is still many years away from flotation.

While there is no doubt that social media sites are a genuinely groundbreaking innovation that is changing the way we communicate in many significant ways, past experience with similar Internet phenomena shows that the hyper charged atmosphere of excitement cannot last indefinitely. The industry is currently characterized by easy capital, plenty of media attention and widespread user curiosity – all of which directly boosts creativity – but all that will come to an end eventually.

This does not mean that there is no future for social media sites. On the contrary, the future is just as bright as ever and at this relatively early stage of the game, it is hard to predict just how huge the whole industry can get. What companies and investors should do however is to adapt their approach to be prepared for the changes that will inevitably come in the future.

In a report published in 2007, Ri Pierce of Grove Technology and an analyst at U.K.-based Datamonitor has detailed a few suggestions that will help companies deal with the changes. Many of these suggestions revolve around understanding market strategies and various technological developments.

One of the most important things that companies can do to roll with the punches is formulate a two pronged approach to deal with the hothouse atmosphere that the industry is currently experiencing as well as the eventual cooling off that is sure to follow. This strategy will involve companies becoming more heavily involved in establishing and maintaining the infrastructure that is needed to run these types of web sites. They would also do well to find effective means by which to support social-networking services especially in the aspects of scalability and availability.

As for the social media sites themselves, the most effective means of ensuring continued popularity is through social media optimization. There are a number of ways commonly used to do this but five rules have been particularly effective in attaining this goal. Formulated by Rohit Bhargava, these rules are: Increasing the linkability of your social media site, making the tagging and bookmarking process easy for your audience, rewarding inbound links, helping your content travel, and finally encouraging mashups, which are web applications that combine data from more than one source into a single integrated tool.

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