However, it is becoming increasingly difficult for Facebook to be all things to all people. Facebook is designed primarily to help us connect with our real-world friends. For example, when we try to add a friend on Facebook, we receive a pop-up warning, “Please only send this request if you know her personally.” Facebook considers too many requests to unknown people as spam and has shut down or suspended many accounts of Facebook users for doing this.

Many people are looking to connect with people within social networks focused on specific professions or interests. This unfulfilled need with Facebook has created huge opportunity for entrepreneurs to create vertical social networks. I’ve developed several vertical social networks, such as AdoptionVoices.com, GenealogyWise.com and Viajamos.com.br (a Brazilian travel social network). These vertical social networks can provide features that will likely never be offered by general social networks. For example, a cooking social network such as BakeSpace.com has functionality to facilitate recipe sharing.

Mark Evans from Sysomos (a Marketwire company), recently said that, “Facebook, LinkedIn and MySpace dominate the social networking landscape but there are many people looking for a more relevant place to digitally network… If everyone is partying at the same place, there may be opportunities for other places to establish themselves as the new, cool place.”

It would not be surprising to hear an adoption attorney say ,“I already have an account with Facebook and LinkedIn, but I don’t need another social network.” If this attorney was referring to another general social network, I would certainly agree with him. However, if the attorney discovered a popular adoption social network, he would probably have a strong interest in joining. In that example, adoption is a much deeper vertical niche than a general social network. Generally, the deeper the niche, the greater the levels of passion and engagement will be for people who are interested in that niche.

Many of us have joined vertical social networks to find more relevant sites to digitally network with others who share our interests. According to a Nielson report in June 2010, 22% of all time online is spent on social sites, such as social networks and blogs. ¾ of global consumers who go online use these social sites. The number of people visiting these social sites increased by 24% over last year, and the average visitor spends 66% more time on these sites than a year ago.

A writer on Hover.com recently wrote, “I personally love the niche social networks I use. They allow me to meet more people who share a stronger interest with me about video games. You may not get the quantity of advertising & people on these niche social networks like you do on Facebook. However, the quality is higher and having a relevant offering for the people is going to make your brand stand out more.”

Janet Teo from FutureLab recently wrote, “Where I do spend a lot more time is on vertical social networks. Nike Running is one of my favourites. I am training for a run and it allows me to compete with friends and people from around the world via my iPod. It keeps me motivated and offers a real world linkage that Facebook doesn’t have… Vertical social networks will have smaller users in total, but will allow those users to engage with each other in a much deeper way.”

Also, vertical social networks can often provide better monetization opportunities than general social networks. Andres Chaves from the TCU Explorations in New Media project wrote, “Because these networks are so focused they’re also going after a different type of advertising, often at a higher price.” Jeremiah Owyang from Forrester Research said, “Companies are learning that these smaller communities may reach people that are more valuable to their brands.”

Vertical social networks can provide deeper passion, engagement, content, monetization per page view, and networking relationships. As said by John Jantsch of Duct Tape Marketing, “The Future of Social Networks is Vertical.”

(1)    Viral Coefficient of 0.5 – If a community has 100 members and a viral coefficient of 0.5, then those 100 members will bring 50 new members to the site.  Those 50 members will bring 25 members, and so on, and the community will ultimately plateau at about 200 members (after 10 periods of time). A social network with a viral coefficient less than 1 will stop growing on its own.

(2)   Viral Coefficient of 1 – If a community has 100 members and a viral coefficient of 1, then those 100 members will bring 100 new members to the site, and those members will bring another 100 members to the site.  This will result in linear growth from 100 to 200 to 300 until the community has reached 1,000 members in the same 10 periods of time as the first example.

(3)   Viral Coefficient of 2 – If a community has 100 members and a viral coefficient of 2, then those 100 members will bring 200 members, who will bring 400 members, who will bring 800 members, etc.  By the 10^th period of time, this social network will have 51,200 members.  Having a viral coefficient is like compound interest for social networking.

Fast-growing social media sites, such as Twitter, sometimes forgo advertising during their growth stage in order to maximize their viral coefficient and accelerate their exponential growth. Here are a couple of core principles to improve and maintain strong viral coefficients:

(1)    Create something useful that people want to share with others: The viral coefficient will improve if sharing the information will make the sharer look better or improve their relationships with friends.  Also, if the product is simple, easy-to-understand, free and web-based the “barrier of entry” and “friction” will be reduced and the viral coefficient will generally increase.

(2)   Create a reason for people to share the message with others:  FamilyLink.com members want to invite more family members so that they can know about important happenings in the lives of these people.  Fans of a charity may be motivated to solicit their friends to donate to a charity about which they are passionate.

(3)   Make it easy for people to share the message with others. Viajamos.com.br allows members to easily invite friends from their email or easily post a cool piece of content to Twitter.  FamilyLink.com makes it easy to invite family members on Facebook, and also suggests other members to whom members may be related.

Here’s an article explaining how to calculate viral coefficients.

The site was launched at Campus Party, a huge technology event in Sao Paulo 11 days ago.  Since that time, we have seen exciting viral growth.  Within the last hour, the 30,000th person registered to be a member of Viajamos.com.br.

Members are also actively engaged with the site.  For example, 63,000 photos have already been uploaded to the site, nearly 1,600 topical user groups have been created, 1,500 blog entries have been posted,  500 events have been added to the site, etc.

One of the keys to successful launch of this social network was that a list of “key influencers” in the genealogy sector was developed.  Then, we reach out to those key influencers when GenealogyWise was in beta and invited them to be the first members of the social network.  Not only did many of those key influencers join, but they also invited their friends, posted on their blogs, and told others about it on other genealogy communities.  

Yesterday I read a blog entry about a Broadway musicals social network, BroadwaySpace.com.   Much of their success is credited to getting Broadway actors and other celebrities to join their social network.

The book Influencer contains the story of a PhD who took a job for a university trying to get local farmers to adopt new, more effective wheat seed.  The PhD was able to get one farmer to test the new seed.  That farmer had a bumper crop, however, the other farmers were still unwilling to use the new wheat seed.  The PhD had made the mistake of selecting a test farmer that was not trusted and actually hurt the wheat seed adoption instead of helping his efforts.

It is important that the first people to test a concept are “Influencers” who will give the concept credibility. It is very important that the first members of a social network are the right members.  If they are true “Influencers” they will serve as a large part of the catalyst for growth.

“Approximately once a decade, a radical new technology emerges that fundamentally changes the business landscape.  In every case, regardless of prior competitive dynamics, businesses that understand and appropriately adopt the technology win, while those that fail to do so lose.  In the 1970s, this was mainframe computing.  IN the 1980s, it was the PC. In the 1990s, it was the Internet.  And today it is the online social graph.” (Clara Shih in The Facebook Era)

The social graph is the world wide web of people.  It is the map of everyone on the Internet and how they are interconnected.  The social graph is for people what the Internet is for interconnected webpages.  Social networks like Facebook, LinkedIn and MySpace are helping to construct this social graph.

Each of these radical technology evolutions has been punctuated by a cycle of innovation, commercialization, emergence of new applications, and then large-scale impact on business.  The online social graph is following this cycle, and is facilitating a “new, more nimble, and more efficient class of businesses that outcompetes those using technology from the previous era.” (Clara Shih)

I started working with the Internet and online communities almost 13 years ago in 1996.  I created Adoption.com, which became the world’s largest adoption service of which I’m aware (measured by the number of people using its services each month).

As my first consulting project I created the initial vision and directed the creation of the first website for Law.com, which I have been told sold for about $20 million within approximately 2 years of launch (unfortunately, I didn’t get any equity in the project).  I also built the Families.com online community and sold it in 2007.

During the last two years I have been doing consulting work for next-generation digital media properties, such as a large iPhone application and the 4th largest Facebook application, with 54 million registered members.

I have also built niche social networks (such as GenealogyWise.com) to leverage the social graph within niche industries.  These niche social networks provide tools that enable members to connect and share content with others who share similar interests.  GenealogyWise is just a few months old, but it already has 13,000+ members, 3,000+ sub-groups on genealogy-related topics, 700+ blog entries, 350+ videos, etc.

How could a social network help your business to seize your opportunity within the social graph?  If you are an accountant or attorney who practices a specific type of law, you could build a social network for people interested in your areas of practice.  If you own an emergency preparedness company or a manufacturing company, you could build a niche social network of your potential clients.   If you are part of a membership organization or are planning an event, a niche social network can help you recruit and develop stronger relationships with members and attendees.  If you are a politician, the social graph is an essential element of your campaign. President Obama’s social media strategy was given a large portion of the credit for his election victories.  If you are interested in sewing or if your child has a health condition, you can build a social network of people who have similar interests.

Then, once you have developed a successful social network, you can generate revenue in a variety of ways, such as selling advertising, directory listings,virtual goods, classified ads, e-commerce and subscription sales.

I have expertise in creating niche social networks, developing social media strategies for businesses, and helping organizations to better monetize their digital media properties. If your business could benefit from qualified, seasoned consulting to better seize the opportunities within the social graph, I would love to help.

Monetization through virtual currencies and virtual goods is a topic that has fascinated me recently.  Online communities have developed virtual currencies which can be purchased or earned, and then can be redeemed to buy virtual goods or services within the community.  For example, a community member could purchase a suit of armor in a multi-player game, or virtual flowers to send to a friend who is sick.

Last month, the Associated Press reported that GaiaOnline.com collects $1 million per month from players buying virtual goods ranging from puppy ears to lightning bolts.

VentureBeat has reported that the MobWars Facebook application generates more than $1 million per month from the sale of virtual goods.

A few days ago MarketingVOX reported that Build-A-Bear’s online community, Buildabearville.com, might save the financially struggling company which posted a $2 million net loss for Q3 earnings.

Today I finished listening to the audio book “Play Money” by Julian Dibbel.  This book chronicles the story of a Wired magazine author who becomes enamored by massive multi-player online games (MMOs), and his attempt to make a full-time job out of selling virtual goods from the game for real-world cash.

Online communities have been criticized for years due to the increased difficulty of monetizing through advertising sales.  Virtual goods and services provide a much more effective way to monetize these online communities than advertising sales.  For example, Last month Adotas.com said that Facebook’s virtual economy will be worth more than $100 million in the next twelve months.

A few weeks ago, I attended the Virtual Goods Summit in San Francisco and was shocked by the number of attendees who are making a living by selling virtual goods.  I believe that virtual goods and services are the best way to monetize many online communities.

Facebook is one of the leading online communities, and the sixth most popular website globally (source: Alexa). Currently, Facebook has a revenue model based primarily on advertising revenue (although they are working to add revenues through music distribution). As a result of their historical focus on an advertising model, in 2007 Facebook generated $150 million (source: +8) and lost $50 million.

In contrast, QQ, the Chinese social network, generated $523 million in revenues during 2007, and reported an operating profit of $224 million.

What is the core reason behind such divergent financial successes in these online communities? The answer lies in the focus of revenues for the two sites. Facebook and other popular social networking community sites have relied almost exclusively on advertising sales to generate revenue. QQ generates two-thirds of its revenue from virtual games and services and 21% from mobile services. Online ad sales only accounted for $67 million, or 13% of revenue.

Online communities have the ability to leverage the fanatical loyalty of their repeat members to generate revenues in a variety of ways other than advertising banners, as QQ has demonstrated. As this model is successfully and profitably implemented, these loyal communities become the heart and souls of websites instead of liabilities.