I’ve received more than one hundred European investment proposals of 2nd/3rd tier social networks within the last 8 weeks. Most of them are universal social networks – trying to compete against facebook, studiVZ, myspace, etc.

In my understanding the don’t have a chance against the established players, as most of them don’t differ in their feature set and target audience. I still believe in niche players (travel, …) who are implementing very specific features that might be too unique to be implemented for example as facebook widgets.

In the last 2 month I recognized that hundreds of my friends in Europe signed up at facebook. All of them were using local social networks (such as studiVZ, xing, uboot) but now churned to facebook. Even a lot of ASW (a small world) members turn into extensive facebook users.

Conclusion: starting another local social network in Europe doesn’t make sense and is not hot, unless it provides great functionality and doesn’t require a huge user base that it works (where you don’t need all your other friends to be signed up). If there is no potential to grow the user base by utilizing a snowball effect – it doesn’t make sense either. If you can’t defend it against big players who are offering more and more functionality via widgets, it doesn’t make sense either.

nice techcrunch post: Why Are Founders and Execs Leaving Second Tier Social Networks?