Why did most communities in the early days of e-commerce fail? What factors enable some online social networks to prosper today?

Most communities in the early years of e-commerce failed because noncommercial sites such as The Well could not survive or grow based on subscription fees alone and most for-profit communities experienced great difficulty in generating profits. The costs of content, technology, and customer acquisition as well as the marketing required to achieve a large audience, typically overwhelmed the puny stream of revenues from advertising, tenancy/sponsorship, and subscriptions for premium content. The availability of venture capital finance and Internet technology resulted in many sites serving the same interest and affinity groups, splitting the market into fragments, making it impossible for any one of them to become profitable.

The factors that may enable some online vertical communities to prosper today are :- 

• first, consolidation, which may enable them to attract sufficient market share to become profitable.

• Second, some are focusing on narrow vertical communities of intensely interested members and keeping marketing costs to a minimum. 

• Third, some are showing signs of enjoying network effects, becoming the dominant players in their small vertical niches. 

• Fourth, as the Internet audience becomes more sophisticated and targeted in its behavior, engaging in less general surfing and more purposive use of the Internet, online vertical communities may yet prosper.