This has been an interesting week for the social web. There’s always lots of news to pick through but this week there were three items that I feel are quite telling as far as where we stand vis-a-vis ventures that aim to capitalize on the social web.

Facebook Is Not All Powerful

The controversy over privacy with Facebook’s Beacon application and Mark Zuckerberg’s subsequent apology tells us that in spite of what web 2.0 fan boys think, Facebook is not all powerful. Many people have been harping on the fictional valuations and the fact that prominent Googlers have been trading in free massages for a bigger upside on the stock options. And the euphoria on the Beacon announcement was silly. I wasn’t impressed and neither were at least seventy thousand users who joined a Facebook group protesting the lack of a total opt-out for Beacon.

Seventy thousand people is a small slice of Facebook’s membership but there were enough influencers in there to convince partners like Coke and Overstock.com to walk away from the program for the moment. It’s hard for me to believe that an old hat brand like Coke had the brains to walk away before Facebook threw in the towel and added a way to opt-out completely. The message is clear. You can’t build an empire on the backs of your users without giving them something in return. And features like that should always be added on an opt-in basis. The Facebookers made a rookie mistake that leaves me wondering if other social networks are taking notice before they put serving ads above all else.

Famous Bloggers Can Be Stupid Too

The blogging culture really loves to deify and demonize people. The pack moves fast. If they love you then you are golden. And if they hate you then you are torn to shreds. I followed last years drama with a guy named Sam Sethi splitting TechCrunch in a very public disagreement with TechCrunch founder Michael Arrington. I was mildly amused. I watched silently as Sam’s blogger pals congratulated him on the launch of an overly ambitious blog network called BlogNation. Several months after the launch there are claims that good ole Sam didn’t pay people what he promised. And on top of that he’s accused of lying about getting funded.

One mark of a bubble is the lack of fundamentals. Both sides of this story failed to use good business sense. On Sethi’s side, he made the foolish mistake of trying to launch an empire before he even owned an acre of ground in the blogosphere. An ambitious blog network could work if the various writers were willing to work for sweat equity. But that wasn’t the case. So it seems that instead of growing organically Sam decided to throw a hail mary and hope the ball would come down before he had to cut some checks. Ooops! Meanwhile supposedly intelligent bloggers let themselves go for months on promises alone. How dumb is that? If you expect and need to be paid for your work then you best do a strong assessment of your employer’s ability to pay. I kept hearing that Sam Sethi worked at Microsoft and wrote for TechCrunch so he must be a rock star.

Evidently social web ventures are all about trust. Try presenting trust at the supermarket when it comes time to pay. I’d rather protect myself against fools who fail to pay.

Many More Will Be Folding

Speaking of TechCrunch, Michael Arrington announced today that his other startup called Edgeio would be shutting down very soon. I know this sent ripples through the bay area web 2.0 community. After all, so many marketing plans are based on getting onto the front page of TechCrunch. Why do you think startups love to hire ex-TechCrunch writers. It never helps but they will keep trying it. But if the TechCrunch founder, who has unlimited access to pump his own company can’t make a go of it, then what future do the other outfits have? Not much.

This goes back to the issue of fundamentals. Most businesses can be built to succeed if they are solving a problem, doing it first or better than others who are doing it and operating in a way meant to maximize innovation while conserving capital. That means you live like a pauper until the company has strong revenue. That’s not happening these days. Edgeio went through $5 million in about a year. Does it really cost $400K per month to build a classifieds site? They certainly weren’t spending money on proof readers. Their press release announcing some nifty media sales platform has several basic words (like download, inherently and result) spelled incorrectly. Sloppy work there.

The point here is that it doesn’t matter what you did before. These businesses should not be judged and heralded based on the past experiences of their founders. They should be judged based on the quality of their business plan and their ability to actually execute at a reasonable cost. Edgeio’s features for selling digital media actually looked interesting to me so maybe they will be able to sell those off to another party. But at the end of the day it still didn’t matter that Mike Arrington was behind the project. There seem to be a lot of social web startups that are relying upon the name of a person rather than relying on outstanding features and paid services. Many of those startups will burn capital and fold in the coming year.