The latest brouhaha between Facebook and its users illustrates how far away many social networking sites are from having viable business models. The Facebook execs must be seething over the latest outcry from ungrateful users who haven’t figured out that you can’t get something for nothing. The ingrates get a vast amount of services for free. Meanwhile the users are deeply worried that Facebook is taking ownership over highly personal information and is going to use it to make money. The sad part is that they are both partly right.

Facebook and its users won’t get over this impasse until they reach some bargain that allows Facebook to make money from its risk taking and investment in creating this massive network, and that allows the users to participate securely in the community. After Beacon, it’s clear that Facebook needs to figure this out if they want to avoid the fate of Friendster that withered in part because its community turned on it.