Evolution of a Hot Internet Space

January 17th, 2007 | Categories: acquisitions, launch, strategy, trends

Over the past 2 years, we have seen exponential growth in a few select Internet spaces. For this article in particular, we will take a look at three of them: social networking, photo sharing, and video sharing. We will observe how each evolved, developed, and solidified its place in the mainstream.

Charles Darwin would have been proud. The evolution of these spaces support the notion of ‘natural selection’ and ’survival of the fittest’. In any case, here is the development as I witnessed it:

  1. Several players enter a space early in the game. Due to the immaturity of the industry and lack of education, little adoption has taken place thusfar. In addition, simplicity and functionality are not optimal. Finally, the user experience is far from perfect.
  2. Then, along comes a player who recognizes the potential growth of the industry. However, contrary to previous development, this new entrant decides to simplify the game and create the utmost user experience. Not only does this create a more intuitive service, but it exemplifies the flaws and weaknesses of competitors. In this case, I am talking about MySpace (social networking), Flickr (photo sharing), and YouTube (video sharing).
  3. These new-comers entered a potentially lucrative space, dummied down the offering, and created a functional, enjoyable user experience. For realistic reasons, exponential growth ensued. In the case of MySpace, users invited their friends as this is the raison d’etre for a social network. This spurred viral growth. In the other two cases, users upload their user-generated content and media files. But what good are uploaded files if only you get to view them. There is no value there whatsoever. Value enters the equation when a user invites their friends or other potential users to view their photo(s) and or video(s). Once again, this encourages viral growth.
  4. After a year or two of phenomenal growth, the industry leader gets bought out by an Internet giant or media conglomerate (MySpace > Fox Interactive; Flickr > Yahoo; YouTube > Google). At this point, revenue models are still in their infancy, and the acquisition company is focusing more on the size, growth, and demographic of the user base. Eventually however, the acquisitor must implement a revenue model in order to turn a profit from the deal.
  5. In all three cases, a somewhat targeted advertising model materializes. And as of today, all three services continue to operate as independent entities with a lack of branding from the parent.
  6. At this point, many of the smaller players have fallen off the charts. They’ve either run out of cash or failed to generate a considerable amount of traffic. Only a select few industry headliners can generate enough revenue (and in some cases, profit) to stay afloat.
  7. What happens now is the denouement of the industry. This is where things begin to get interesting. Of all the secondary players who cannot compete with the leader, many will ignore the warning signs and continue to position itself against the leader, only to fall short in the end. Nevertheless, the smarter companies will approach the situation differently. These players will take on a niche. This fragments the industry and creates unique verticals. Now sites can grab small subsets of users and traffic from the leader and build a loyal user base from a different angle. Though the potential target market may be smaller, the potential for success and the ability to drive higher CPMs is much more likely.

Here is a small list of some of the secondary level players who have done a good job of harnessing a smaller, more targeted audience:




So what will be the next hot Internet space? If I knew, I wouldn’t be posting right now.

NOTE: Some may argue that Photobucket is the leader in the photo sharing space. Though it does get the majority of traffic and usage, it fails to grab the attention and buzz of the press.


  1. www.news2.ca Says:

    Evolution of a Hot Internet Space

    For this article in particular, we will take a look at three of them: social networking, photo sharing, and video sharing.

  2. Tony Says:

    next hot Internet space? Think of it this way:

    1D object is a line, lets equate it to text (social media)

    taking an object and making it perpendicular to itself increases the dimention. Such as a group of perpendicular lines are effectivly a square (or another shape)

    2D - pictures

    once more,
    3D cube is like squares/pictures stacked on top of each other, you guessed it, video!

    the next logical step for the hottest internet space is, of course, a 4D hypercube (it takes a while to get this into your head).

    What is the media hypercube? It’s like videos stacked on top of each other, all moving in different directions (yet grouped into one larger object). Kind of weird, I know.. but if this inspires anyone to start up the next billion dollar website, I’d like a linkback please :)

  3. Aidan Says:


    That’s OBVIOUSLY the next step. How did I ever overlook it? Anyways, you lost me at ‘1D’…



  4. Dethroning the Internet Giants Says:

    […] I touched on this concept a little bit in my post about the Evolution of a Hot Internet Space. I’ve said it once and I’ll say it again and again and again… Verticals, fragmentation, and niches are what’s in store for the new web. Nobody can directly compete with the big guys right out off the gate. It’s certain death. But if they choose a smaller market, they can prosper. […]

  5. The Next Step for Search Says:

    […] Evolution of a Hot Internet Space […]

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