Social Networks Aren’t Products: On launch day, I found that traffic was very strong, but hardly anybody was signing up. I literally got more e-mails from people saying “what a great site!” than I actually got sign-ups. Same for the following few days. So I decided to try an experiment. I put up a preview screen saying we were taking sign-ups and allowing customers to build their profiles, but I hid the page that allowed site visitors to browse other profiles. In this way, nobody was able to see how many (or, more accurately, how few) other members of the site there were at the time. The next day, sign-ups multiplied by several staggering orders of magnitude.

I learned from this experiment early on a lesson that would repeat itself for the next two years: a social network isn’t a product as such. Rather, the product that a social network provides is access to a large pool of other people. Every social network, whether it be a subscription-based dating site or an advertising-funded general community, must grapple with this ineluctable fact. It’s what makes the rules for social networks different from utility applications like Basecamp and BlinkSale.

If a new member signs up for Highrise today, she can use the application, put in some contacts, appreciate the app’s interface and functionality directly and, if she likes it, leave a happy paying customer. Highrise with one customer is a product with one happy client who might just become an evangelist to others. On the other hand, a social network with one customer, even if it were infinitely better than MySpace in every regard, is a company with one bored and angry customer, which is to say: an utter failure. In the taxonomy of Web applications, social and utility applications are entirely different species. [Excellent grounded story.]
Source: Vitamin Interviews