The Valley fad of social network games like Mafia Wars and Farmville disguise old-school scams, Mike Arrington has been demonstrating over at TechCrunch this weekend. High-revenue don of social networking games Zynga, which makes the aforementioned Mafia Wars and Farmville, gets one-third of its revenue from various shady "commercial offers" and lead-generation systems, Arrington reports. Here's how HotOrNot founder James Hong described the social networking cash scene in a TechCrunch comment:

The offers that monetize the best are the ones that scam/trick users.... i'm pretty sure most of the money ended up getting our users hooked into auto-recurring SMS subscriptions for horoscopes and stuff.

Examples, via TechCrunch:

• "Users are offered in-game currency in exchange for filling out an IQ survey... They are told their results will be text messaged to them... and are texted a pin code to enter on the quiz. Once they've done that, they've just subscribed to a $9.99/month subscription."
  
• "Users are offered in game currency if they sign up to receive a free learning CD... The user is told they pay nothing except a $10 shipping charge. But the fine print, on a different page from checkout, tells them they are really getting a whole set of CDs and will be billed $189.95 unless they return them."

There's an entire thriving "ecosystem" devoted to these sort of "deals," the sort of thing that in a different context might just be called a "crime ring." It's a profitable network, at least for the people at the top: Arrington estimates Facebook might be taking in $50 million per year from Zygna alone.

So, social networks are basically turning in to just another snakeoil sales channel in the mold of late-night 1-800 number commercials. Which sucks not only for the marks who've been duped but, ultimately, for Facebook's investors, since taking this sort of easy cash reduces internal pressure to come up with some sort of truly innovative revenue stream.

Not to mention what it does to user trust: Who's going to want to hand over their credit card information or even cell phone number to the likes of Facebook amid all these scams? (Answer: People who passed their "IQ test" with flying colors and a useless $10/month subscription.)

Various startups, we're told, have already been able to buy access (for thousands of dollars, not the millions Google or Microsoft would have to pay) to tweets. Twitter is in "advanced talks" with both those companies to sell access to a full feed of tweet data for use in the companies' search engines, according to Kara Swisher at All Things D. Such a feed would presumably include all new tweets as they are posted along with public data on favorites and who is following whom.

Thought they haven't widely publicized the practice, Twitter is already in the business of selling access to its "firehose" of public data, according to a source close to one customer of the service. Twitter typically charges between $1,500 and $3,000 per month for such access, sometimes for a limited subset, this person said.

Then again, a typical customer until now has been a relatively small startup company with little revenue, utterly dependent on the Twitter ecosystem. Google and Microsoft are more fearsome competitors, with much deeper pockets. Google CEO Eric Schmidt just this past March called Twitter a "poor man's email system," and his company recently added real-time features to its GMail product, making it more Twitter like.

Of course, working with tech behemoths has its benefits, starting with cold hard cash. Swisher said deals on the table include payments of "several million dollars to Twitter." The company could also try and negotiate a cut of the advertising sales accompanying its results.

But the biggest benefit would be to reignite Twitter's growth, which appeared to stagnate over the summer. A company with a $1 billion valuation and little revenue lives and dies by its future promise. And a surge of search engine traffic could make that future look significantly brighter. Assuming, that is, that there's anything worth finding in the 140-character mental ejaculations of narcissists, celebrities and desk jockeys.

(Pic: Twitter co-founder Evan Williams with Google co-founder Larry Page, Williams' former boss, at industry event Foo Camp in 2007. By Scott Beale.)

"We thought auctions were a religion," Donahoe says in the video excerpt above. "Auctions are nothing more than a format." Writes Ina Steiner of AuctionBytes, where you can find the full video: "This is a rather amazing statement for the head of eBay to say, given that auctions are such an important differentiator" for the company.

Indeed, but they're also a pain in the neck: eBay's auctions are famously a favorite playground for fraudsters and scammers and occasions for heated disputes between even legitimate buyers and sellers. Multiply those headaches across millions of users, and you can understand why the company's MBA CEOs — first Meg Whitman, now Donahoe — have decided to shift the company's focus elsewhere. Whitman pushed eBay into sales of new goods while jacking up auction fees; Donahoe has emphasized the growth potential of PayPal, as well as bulk sales from partners like Buy.com.

But solving tough problems is, ultimately, the best way for a business to protect its profits from competitors. Take, for example, PayPal, the acquisition that has become eBay's crown jewel. The company beat back rival startups as well as huge competitors like Citibank above all else on the strength of its relentless approach to combatting fraud, co-founder Max Levchin explained in the book Founders at Work:

The financial industry people understood the risk, but they weren't willing to do the sort of stuff we did... I remember all these companies announcing that they were going out of business and they expected PayPal to go out of business soon too, because the fraud numbers were so staggering they could not see anyone handling this sort of thing.

Levchin ultimately solved the fraud problem with a combination of human investigators, and computer algorithms to funnel select cases to those investigators. He eventually decided PayPal was a "security company pretending to be a financial services company." It's possible Donahoe realizes that eBay is, likewise, a security company pretending to be a retail services company; he has talked about revitalizing the core of the company and focusing on small sellers. But when he brags to a retail conference about taking auctions to 25 percent of eBay business from 80 percent, it sends the signal that eBay is retreating from his company's central lucrative challenge rather than attacking it. And who wants to bet on a quitter?

Young Brown should take a look at 37-year-old Evan Williams' biography. The Twitter co-founder worked at Google for a year and a half, witnessing first-hand how a total lack of focus — Google branched out wildly from search— is no barrier to massive profits. Then Twitter happened only because Williams was aimless enough to abandon the original startup from which it sprang, Odeo, just as he had abandoned the original plan of the company behind his last smash hit, Blogger.

Williams is the perfect embodiment of the Silicon Valley ethos that business plans are oppressive things, to be deferred as long as possible.

(Pic: Williams, by Joi Ito)

You can still use Facebook dating apps, as AllFacebook.com points out, but those usually want to make you pay money eventually. Of course, it's not like random profile searches are the best avenue to a romantic liaison. But the prim change to Facebook's search system fits neatly into the social network's uptight culture: First it was only for Harvard students, then Ivy Leaguers, then college kids; to this day, your profile is, by default, shielded from the general public and even most other Facebook users. (We asked the company's flacks for comment and have yet to hear back.)

While Facebook has been defined by the nerdy engineering culture of Silicon Valley, and of founder Mark Zuckerberg, competitor MySpace was started by a spam and spyware company, promoted itself in seedy nightclubs, hosted events for aspiring models and eagerly recruited Tila Tequila away from Friendster as an early member. Though owner News Corp. is struggling to turn the site around, it must take some comfort in the fact that Facebook is as prudish as ever.

(Pic: Helgasm on Flickr)

Zivity made several big mistakes:

• No hardcore: Zivity clung to artistic pretensions, screening pictures for "tastefulness," "respect," and "promoting female beauty." Which is morally commendable, but proved disastrous from a business perspective; free tasteful nude pictures are chock a block on the internet; as even Arianna Huffington knows, people only pay for the fetish stuff.
  
• Suicide Girls: As Fleshbot noted when Zivity launched (NSFW link), amateur-y SuicideGirls.com already had a large online adult community when Zivity entered the fray. Suicide Girls also had a large user base of people interested in amateur, or at least amateur-looking, porn.
  
• It cost money: Really good amateur content has proven it can attract readers; really good professional content can make people pay. Zivity tried to combine amateur content with a $10/month subscription model — before it even had any breakout hits.

One thing you can't blame for Zivity's crumble: Brain-dead, sexually repressed male patriarchy. The site was started by Cyan Banister, a seasoned tech exec and sysadmin — and one of her site's first models (see picture at top). And its early investors included none another than Peter Thiel, Silicon Valley's most prominent gay venture capitalist.

Thiel has said there are "only a handful" of companies "truly innovating" in tech today; perhaps he can show Zivity how to unlock its inhibitions and push the envelope while there's still a little time left for the vastly reduced site.

(Top pic via Fleshbot, NSFW link)

Saul Hansell of the New York Times tweets that he's testing just such a system. Now, it's possible that the tech writer was trying out a third-party advertising platform; i.e. ads served by a company other than Twitter Inc.

No matter: The concept is sound, and contextual ads based on user input have been Google's cash cow; given how many of its users tweet in order to find information, Twitter would be wise to at least test out such an elegantly simple system, if the microblogging service can find a way to show the text ads unobtrusively (for example in the sidebar, where it places those paid concept definitions).

As far as conceivable multimillion-dollar advertising schemes go, that would be among the least obnoxious. And if there's one thing Twitter users hate, it's obnoxiousness, right?? (*Cough*)

(Top pic: Twitter CEO Evan Williams at the company's San Francisco HQ, March 10. Getty Images.)

TechCrunch has published financial forecasts assembled by Twitter Inc in February and obtained from management's personal files by a computer hacker. They project $400,000 in revenue this quarter, presumably from those adorable "concept definition" ads. Sales were projected to increase tenfold by the fourth quarter, ramping to $62 million by the fourth quarter of next year.

Twitter Inc., which doesn't like people talking about its hacked internal documents, told TechCrunch the numbers are stale and unofficial. But, specifics aside, they leave the unmistakable impression the microblogging service was serious about making money this year. That goal may have been intended only for company backers; now that it has gone public, there will be even more pressure on the company to make its creative approach to advertising pay off over the next five months.

(Top pic: Twitter CEO Evan Williams at Allen & Co.'s Sun Valley media summit July 10, 2009.)

Twitter has taken to selling off the "concepts" it defines under user profiles. Early clients include such diverse customers as a website about Twitter and a website about Twitter:

If the ads are a bit twee, well, Twitter's take probably is, too. But the company is determined its ads must be innovative, and revolution is never free.

(Pic: Nathan Macan)

John Battelle's Industry Standard hired research analysts near the height of its hubristic expansion c.2000. Former Red Herring editor Jason Pontin recalled that his magazine, the thickest of the dot-com bibles, attempted the same. He writes in an email:

We hired and built an entire research division: some of its material found its way into the print and online products. I do not believe they ever succeeded in selling much in the way of proprietary research...

You need to understand that there are really two kinds of research products. The first, which we tried to do and failed at, I completely supported as the editor at the time: expand our editorial products into higher-priced subscription research on the model of The Economist Intelligence Unit.

The second is truly proprietary research bought by a single client or group of clients: I wasn't sure that was a great idea, because it was an entirely new field for us requiring a new infrastructure and staff, and we failed at that, too.

Not coincidentally, perhaps, GigaOm publisher Om Malik is a Herring veteran, and made his bones on Wall Street, where proprietary research is common. His current effort is relatively inexpensive ($80/year) and targeted at broad groups of readers. It also has some sort of Web 2.0 twist involving outside contributions.

Hopefully for Malik, those differences will be enough to keep history from repeating itself.

(Pic by Jyri Engestrom on Flickr)