After reviewing some of the business models employed by the social networks, we are struck with the lack of self-sufficient concepts being employed.

Many are falling back on advertising or virtual transactions because recession has made it difficult to sustain a business without a solid model.

Just two years ago there was a effort to find and define the various business models for an internet business.

I have included a few links to some of the business models lists:

From Fred Wilson comes a long-tail list.

From professor Michael Rappa who wrote, “In the most basic sense, a business model is the method of doing business by which a company can sustain itself — that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain”. (We will discuss how the Value Chain is important to selling in a minute.)

Dave McClure spent some time discussing Facebook’s need to find a good business model in early 08 when he suggested, “All they gotta do is figure out how to Show Me The Money“.

The big social platforms like Facebook and Twitter have relied on rapid growth to buy time, as they figured out a monetization model that could sustain. In the end, they have mostly fallen back on advertising sales to pay the bills.

Selling advertising is great. But Google and thousands of other sites are reaching into the pocket of advertisers all at the same time.

Yes, advertising is an important part of the process of selling, but it is not finding a great deal of success in social networks.

Selling things (real things) has been a part of the business value chain for generations. Selling goods can be adapted to the large internet networks as well, but the sales offer must fit the audience.

As we study the list of business models, we feel that the sustainable models for social spaces will begin in Affiliate sales and then move into full-on E-commerce.

Nothing happens of real value until someone sell something. Amazon sells real stuff, so does Ebay, Microsoft and Apple. Sustainable models work off from the proven components of cost-of-goods, capture-cost, mark-up and efficient distribution.

The internet already has proven Affiliate sales commissions and E-commerce both succeed online… The Web 2.0 world will eventually evolve into a place where it is common to buy something real by using an application that adds extra value to the purchase and delivery process.

Sell something and sustain!

There are two ways to look at an unpaved road into the forest…

1. The road is impassable and should be abandoned for another route.

2. The road needs some improvements before it can be truly useful.

Impassable roads, un-traversed mountains and un-crossable rivers are ether dead ends or hidden opportunities, depending upon your perspective.

A recently released study suggests that retailers are finding the road through the forest of social media a little rougher than first expected. This report was highlighted in some of the Facebook blogs as a potential roadblock to the success of retail in this space.

Some are suggesting that retailers should just stick to using Facebook as an advertising tool and abandon the construction of a retail sales conduit in this friend network…

It is hard to argue with the fact that over 90% of the major retailers have started down the social media road with fan pages, only to see very low response.

But retailers have always looked for a new route for product distribution, and have been known to pioneer some dramatic new crossings in the past. Just consider the transformations in retailing from the past… Remember the move from catalog shopping to the department store, or the corner store to the mall to Amazon.

The report highlights the low return from retailing in Facebook, which might have many considering this social road impassable for retail sales. We suggest that the road just needs some improvements before it will allow for a smooth transit-way for retail goods. The trail needs the right pavement applied to make social retailing a smoother process. It will be worth the effort in the long run.

The social networks roll on the wheels of conversation and any route through this forest of friends must facilitate and add to the banter, in order to be successful.

A quick look at Main Street in Disneyland gives us a hint as to how we could pave the retail road on Facebook and other social properties. This adventure park draws millions of visitors for a day of fantasy and fun. Many attended on special occasions, like birthdays, weddings and holidays. Most come as families. The Disneyland experience is very much a conversation creator, built on an atmosphere of fun for all ages.

Entering the park, visitors are greeted by the famous Main Street. But you will notice immediately that retailing has been integrated into the fun at every turn….

How did they interject selling into the magic? First, they knew that people would come on special occasions and that these occasions usually revolve around some type of gift giving. Second, they knew that if they sold gifts that would add to the conversation they would ease the sales process and breakdown many retail roadblocks. Think of how many people bring back the purchases of Disneyland and share them in conversation with others.

Wise retailers who want to traverse Facebook will find ways to build small mimics of an adventure park, where family and friends can come on special occasions and buy gifts for one another and enjoy a conversation.

The road into the social forest may be undeveloped today, but the time will come that Facebook will play host to many great adventures in retailing. Pioneering retailers are currently paving the roadway for the next great main street on social properties…

PartyWeDo NOTE: Just as I was about to hit Publish on this post, I got a notification of a comment that Dave McClure made on a plane trip to NYC: “ASSERTION #2: “The default startup business model for 2010 & beyond will be subscriptions and transactions (e-commerce, digital goods).” It seems that Mr. McClure also sees retail sales as a way to pave the road for social media monetization.

Two powerful families are married for user convenience and for future opportunity.

So far, the wedding has been kept hush hush and is flying under the radar… So don’t expect this to make the front pages of the tabloids anytime soon.

It seems the social media superstar Facebook, with its huge entourage of friends has been secretively matched to Amazon’s world leading product inventory, by a party application developer.

Like most weddings, the focus is on a party, and in this case the party is the center of attention. Gifts for the party are to come from the Amazon side of the isle and the guest list will be handled by Facebook.

E-commerce insiders understand that the Facebook family is a very close-knit bunch and that an arraigned marriage will benefit both sides in this case. Massive gift sales is on the mind of the Amazon group and greater support and conversation is what Facebook members are counting on from this union.

Social media followers feel that the long-term success of this marriage will likely be a result of the party atmosphere in which the two have found common ground. Sociologists have long known that couples who communicate well and share with one another have a better than average chance to find success.

The fact that Amazon will shower the Facebook family with gifts should keep both parties happy, particularly when the Facebook side can see the profits that can be generated through real gift giving. Of course, Amazon is happy to offer gifts to a partner who has so many family members pre-disposed to share with each other.

This marriage is expected to produce several great party applications that will benefit the entire family during birthdays, weddings, baby births and many holidays. The next generation of Facebook applications will benefit from the superior DNA of Amazon and Facebook to build a great experience for the users of social networks.

Look for more details of this story as they develop….

Why not join the fun?

I made a call to the producers of BlogWorld with an idea… Well, it was more of a pitch.  “Let me bring a big cement mixer to your show as an experiment in the effectiveness of social media”.

Within a week, we had the permission, secured a booth and constructed a simple display that asked WHY?

I jumped in the truck and pulled the trailer to Vegas to put on this “dog and pony show” for the bloggers.

The promotion was a great success, and the people where even better.  We were the center of attention, with video interviews, photo shoots and many requests for our lime green T-shirts.  We had many who questioned WHY and then took up the challenge to spread the word about the cement mixer they saw at BlogWorld.

We received what I had hoped for; but I got something that I didn’t expect.  I caught the bug… I was so impressed by the good people and their creativity and conversation, that I knew that I wanted to join in the party.

And it is a Party that has given me the opportunity to work with Facebook and participate in application development.

The party is a white elephant gift exchange that our family has done for a few years, online.

As I left BlogWorld, I made the commitment to find a way to share our family game with others through social media. I convinced Sarah that we should invest in this project and find time to put the party online.

Now, we are just a couple of weeks away from launching this new Facebook application. We are breaking new ground and betting on Facebook, Amazon and PayPal to work well together in the process.  I am nervous, Sarah is concerned with the money we have committed.  But regardless of the outcome, I am happy to be involved with this process. We have met some great people and some very hard working and talented technical types.

I am confident that the fun that our family has experienced together online is no different than the fun and excitement that I felt from the bloggers at BlogWorld and the developers within Facebook.

Wayne Sutton shared a blog post that included this video, which is a tribute to Facebook developers world wide.  I am really a technical outlier, but I still feel proud to be rubbing shoulders with this great crowd..

The Facebook Developer Garage Program from Julia Lam on Vimeo.

From all of my Family… Thanks for letting ordinary people join the party!

Facebook has been very generous with developers who ride the rails and live off the power of its mighty engine.

The Facebook Railways

This new application is preparing to demonstrate that the huge Facebook train system could transport 220 million passengers past hundreds of markets, where Facebook could be the landlord and make a fortune.

This experiment is called AlbinoPhant. And it is a white elephant gift exchange hosted on Facebook.  The white elephant party is not new, but AlbinoPhant does something different. It mashes Facebook with Amazon eCommerce and PayPal to become an actual gift merchant on the Facebook railway system.

AlbinoPhant is an real mimic of the traditional yankee swap/white elephant party and therefore, real gifts are purchased and delivered to each player in the party. There are no virtual gift mumbo jumbos (pun intended) from this application. There are real merchandise sales, and there are real opportunities to profit.

The business model for AlbinoPhant is based upon selling gifts to support family and friends during the holidays. It is wrapped in a well known social party game, only done online among Facebook friends.  This holiday party is just the start of the ways that Facebook could transport their users past gift purchasing opportunities during the year.

Facebook users all have one thing in common – They have friends and family riding the same train. These contacts have real-life events that call for real gifts to be shared.  They have birthdays, wedding and babies. They graduate from school; they have bar mitzvahs, quinceneras and baptisms. They purchase new homes and they retire.  And with each life event, they use gifts to demonstrate their support for one another.  These are not virtual happenings, so in the real world they don’t send a virtual table setting to the bride to be.  They shop with real money; and they could be shopping in a Facebook application.

What AlbinoPhant demonstrates is that Facebook applications can facilitate the giving by providing the shopping service along with the party.

AlbinoPhant is the first application to debut from PartyWeDo, a company that is taking traditional party activities that involve gift giving and building them into an online gifting solution for family and friends.

If this first application does not come off the tracks; then they will work with a large network like Facebook to find ways to rent space to  gift merchants and share in the profits. Facebook could act like a property management company, providing space for the vendor kiosks at any number of Facebook Grand Central Stations.

Facebook owns the train system. They can put the engine on any track that they want. They just need to steer the train into the right station; then stop and let their passengers shop and have a good time.

Could this be a train wreck, or THE answer…?