Is social capital an alternative to profits/money

{First and foremost, the musical score made the movie.  I wonder, if there was your average background music if it would have had the same affect.}

The Social Network is an interesting history (well, the last 7 years) of one of the still-coming Internet giants.  What stood out to me was not a certain piece of the story, rather the emphasis on social capital vs monetary gain as measurement of success.  This was perhaps the main struggle in the film, seen as a contest between Eduardo (the initial CFO) and Zuckerberg.  It makes business sense to want to monetize something as soon as it seems possible, Eduardo was in fact correct in a traditional sense.  However, with the new social nature of technology, mostly enabled by things like Facebook, the members of a group and the social capital they create are the true measures of wealth.  Perhaps this was Sean Parkers best insight during the entire movie – “cool” was more important than money.

The reason I thought this was interesting is because of the nature of change, from even a few years earlier when Google was growing.  At Google they did want to monetize, and tried in many different ways.  However, the same social capital was not being built across users, with Google it was plain momentum.  Now, lets compare that with other “social” based start-ups, Foursquare and Groupon.  These companies are not being asked to monetize, they are being told to “grow” and worry about funds later.  The social capital they build through their media infrastructure is their money in the bank.

Xmarks is an example of a company that built a widely used product but without the social capital of other start-ups.  With xMarks you can sync bookmarks across browsers and operating systems, however, that was it, no real sharing etc.  Xmarks decided it was time to close their doors, and sent a notice out to all users.  Within a week Xmarks received some funding, but how long will that keep them around for?  Xmarks is trying to use the new Internet model without the new Internet capital, they need traditional income as a measurement for their success – there is currently no alternative for them.

So my question is, how far can you go with just social capital as it may be, before you have to get traditional profits?  Is social capital through new media an alternative or is it another bubble waiting to burst?  That is what really bothers me, what if every new company thinks they can get away with social capital alone, being cool, etc, will it lead to another bubble?

Here is my initial theory – no it will not lead to a bubble and here is why.  Social capital if we consider it an alternative for money, is in fact somewhat tangible.  Just as a persons “coolness ratio” might be definable by number of friends, parties, etc.  Perhaps new startups can be defined by similiar traits…

In a recent article, Gowalla was compared to Foursquare on membership.  At first, they were practically tied, but foursquare has pulled away, to a somewhat large lead.  Therefore Foursquare should be less worried about profits right now, so does that mean Gowalla is no longer cool?  Is it okay to be #2?  Well, if applying the theory of the Long Tail, it sure is.

However, oddly enough, Gowalla may need more real money to keep going, than a larger operation such as Foursquare.

The tim of cool is upon us… so it begs the question…

Who is worth more – Facebook or Google?



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