Two years ago, Cisco raised some eyebrows by purchasing two social networking companies – Five Across and Tribe.net.
The acquisitions were curious because Cisco is best known as a manufacturer of networking and telecommunications equipment.
Why would Cisco get into the social network game? The Cisco executive behind the acquisitions, Dan Scheinman, told the New York Times, “Part of our job is to form a relationship with media companies and deliver technologies and services to them, so consumers can consume what they want online.“
While some, like GigaOm’s Om Malik, called Cisco’s foray into social networking the “wrong bet“, others pointed out that there are indirect synergies created by the fact that the large amount of bandwidth required to support all of the content sharing that takes place on social networks has been a boon for Cisco’s hardware business.
Whatever the rationale, Cisco continues to move forward with its social networking strategy in 2009.
Despite the economic situation and the questions some have raised about the financial prospects of hugely popular social networks like Facebook and MySpace, Cisco will today announce a new social networking product at the Consumer Electronics Show (CES).
News.com’s Marguerite Reardon describes Eos as “a hosted software platform that allows media and entertainment companies to create, manage and grow online communities.“
Cisco’s goal is to “allow media companies to build interactive Web sites so that fans can connect with musicians, TV shows, movies, or whatever brand a media company wants to promote.”
Michael Nash of WMG stated that partnering with Cisco was a logical choice because WMG isn’t a technology company, but also admitted that WMG had no shortage of other possible vendors who could have provided something similar.
I find Cisco’s launch of Eos at this time intriguing. For a corporation that has made lots of money providing equipment that is ubiquitous to the internet backbone, it’s quite unclear whether or not selling social networking software, on its own, makes any financial sense. There is plenty of competition in this market and one would have to believe that the amount of money in the market is a rounding error when it comes to a multi-billion dollar company like Cisco.
Additionally, it seems that now is an odd time for a big push in this area given the economic situation. While media companies still need to build websites that could leverage Eos, the downturn has certainly forced many companies to cut back on projects and this trend will likely continue into 2009. Given this, it seems like Cisco would have done better to make a big push in the social networking market two years ago when it first entered the market.
On the other hand, it’s clear that social networking isn’t going anywhere. Facebook recorded record traffic on Christmas Eve 2008, demonstrating just how prominent a fixture online social networking has become in many people’s lives. And the interest marketers and media companies have in the potential to use social networks to reach elusive consumers online doesn’t appear to be waning, even if the economy is forcing them to curtail their spending in this area.
So will Eos succeed? Time will tell. In the meantime, it’s clear that Cisco is one company that isn’t afraid to place a bet on something far outside of its core business, social networking, in very tough times. Perhaps other big technology companies should take note.