Social networks don't have a business model. At least that's what an article in Businessweek says:

...as the sites multiply and investors take a closer look, questions abound concerning whether social networking makes for a wise investment. And skepticism is rising over the long-term financial health of these online destinations, with some analysts saying these are the early stages of a social-network bubble. "We have yet to see a viable long-term business model for social networks," says Nate Elliott, an analyst at Jupiter Research. "We have yet to see anyone come close."

The article asks, without directly saying as much, what the next step needs to be for social networks to prosper. Right now, most sites rely on attracting a critical mass, hoping to establish a feedback loop as more and more "friends of friends" join. But then what? It's left to the users to make their own fun. Leave comments. Send messages. Blah. Hence everybody jumps ship when the next thing comes along.

To my mind, social networking sites need to offer real-world benefits (not just online social benefits) to keep people coming back. And, what's more, the network owner needs to continually stimulate the participants with new activities. If you're the host of the party, keep the party entertaining. (This is why I think consumating, an online dating site for nerds and geeks and indie rock type people, is a good idea. The site owners create new "feature-lets" a few times a month. The participation incentive is popularity. which is largely governed by people's responses to the "question of the week.")

Another great social network: mediabistro. True, it's not a social network in the Friendster or MySpace sense, but it does keep community members involved through monthly parties. The site also offers premium content, updated weekly or even daily, for a fee.

If I were going to invest in a social network, I'd be sure it had a well-defined participation metaphor (dating for nerds, networking for media people, etc.) that offered tangible real-world benefits and meet-up opportunities.

Read more opinions from Steve Bryant on his blog, Intermedia.

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