Yahoo’s weak position in social networking is baffling and has been a source of sharp criticism for the company’s top managers. They have been blamed for being asleep at the wheel while MySpace, initially as a startup, went on a tear in the social-networking space, for launching a weak product and also for being unable or unwilling to buy Facebook or another strong competitor.

The WaPo reports on something Arrington knew months ago… is it any surprise that Yahoo! is looking to buff it’s cred in social networking given that they have missed the mark with Yahoo 360 yet still have 54 million MyYahoo users?

Anyone think that Google isn’t working on something to compete here? It’s easy to forget that Google still has Orkut, easy to forget because after the Brazillians moved in everyone else left but they still manage 35 million unique visitors a day, which is, oh I don’t know, bigger than Facebook (I don’t know FB’s daily stats but they were 25 million uniques a few months ago… so I will acknowledge now that I could very well be wrong about Orkut being bigger than FB but how many times in the last week have you read about Orkut yet it’s still that big?)

Everything will have a social dimension (for you GTA fans… "in the future there will be robots") but while that is initially called social networking ultimately it will consolidate and the market will segment as companies realize that individual consumers aren’t going to manage 10 different social networks on a daily basis.

We’ll see demographic shifts of course, but my bet is that a new industry will emerge that is neither exclusively data nor application service provider, but a combination of the two that serves the social dimension into those applications and services that are not in the upper tier of providers.

Tags: social networking, Google, Yahoo!, Facebook