So a guy logs into Facebook. He posts a message on some girl's wall. This makes her socially obligated to reciprocate. The whole transaction is public.

What he said doesn't matter. What she said doesn't matter. Each creates social capital for the other.

So what?

Now Girl C comes along. She visits the profile of Guy A. She sees that Girl B posted on his wall. He looks non-threatening. Maybe even a good guy to get to know better...

(Trust me, this totally works. I read it on a blog. I think it was Guy Kawasaki.[1])

This is what Facebook was made for.

Facebook isn't a platform for "connecting people." It's a platform for creating and distributing social capital.

Take a look at the most popular apps. The majority do one or both of the following

They make you look cool. They make your friends look cool.

Strategy #1 is the tried and true. The best non-facebook example is the ringtone industry.

Why does a twelve-second ringtone sell for $3.50 when the whole song is only a buck? Because it lets you express yourself. In other words, it makes you look cool.

How much is that self-expression worth? Apparently at least three billion dollars a year.

While it's unclear whether Where I've Been will achieve profitability, there is clear precedent for people shelling out on this type of prepackaged self-expression.

I think though that the real potential of Facebook comes through strategy #2. That is, making your friends look cool.

There was this running joke this fall that instead of giving my girlfriend little gifts, I'd give them to her friends to give to her instead. That way not only would she know that I'd been thinking of her, but so would all her friends.

(If a girl thinks her friends would date you, she's much less likely to break up with you. Trust me, this totally works. I read it in a magazine. I think it was PC Gamer.[2])

On Facebook, doing nice things for others has these multiplicative effects because it's something that others can see. Not only does doing something nice show the other person that you care, but it also makes them look cool. And with any luck they'll reciprocate and make you look cool back.

Several of the top ten Facebook apps take advantage of this phenomenon. Apps #2 Graffiti, #7 X me, #8 Superpoke, #9 Free Gifts, #15 Superwall, #16 Foodfight in particular.[3]

There seems to be a pattern.

A good app lets you buy an mp3 for a dollar. A great app lets you buy your friend an mp3 for a dollar.

A good app makes your taste in clothes look cool. A great app makes your friends' taste in clothes look cool.

A good app lets you poke yourself. A great app lets you... Well, you get the idea

With all the hype these days you'd think that in five years Facebook will be used for everything from shopping to ordering takeout. I doubt it. The user interface isn't good enough. The user experience would be incoherent.

People don't go to Facebook to buy. They don't go to Facebook to sell. They go to Facebook because they care about their friends.

And the real strength of the platform lies with this, with the creation and distribution of social capital. And I expect that in the long term the most successful Facebook apps will be the ones that realize this and leverage it.

[1] False. But now he's socially obligated to link back to my blog. Unless he's a bad person. You're not a bad person, are you Guy???

[2] False but accurate.

[3] True. Source: Jeremy Liew