The Economist has a great piece this week on what will undoubtedly come to be known as the "Facebook dilemma:" the fact that social networking is both a fun and useful activity for most folks but utterly impossible to make money from. The piece effectively argues that just as with email and IM, the basic verbs and nouns of social networking (friending and the nodes of the social graph) belong in every network-aware application and not just inside of these monetization ghettos created by VC-backed companies in attempt to mine for the next Google.
Making the comparison between Facebook and the AOL of yesteryear is something that has come up before, but is a rather apt way to look at the problem. The rest of the "open web" will build in social networky features and as they do, Facebook's only hope of staying relevant is to open up at a rate faster than AOL back in the day (which their app platform certainly does not do today). But of course as they do so, they will simultaneously limit the choices for their eyeballs-based business models.
And that right there is the challenge with huge horizontal plays in the Internet spaceâ the more broadly applicable they are, the more they need to be baked into the fabric of the Internet and not held hostage by monetization theories. And in the absence of alternatives to the advertising based business models (other than e-commerce which seems to help the likes of Amazon & eBay build out very horizontal platforms), this dilemma is unlikely to be resolved anytime soon.