Social networking websites have become the latest rage on the Internet. Many traditional websites have been surpassed in traffic by social sites such as Facebook, YouTube and MySpace.

While viable business models behind the social networking sites themselves are still playing out, the benefit of social media to any business is definitely proving itself.

The fundamental premise behind social networking is nothing new- it allows people to connect with and communicate with each other. The reason for the incredible growth of social networking on the Internet is the result of a combination between (i) the evolving technology that allows the average person to post content easily and instantly; and (ii) the viral nature of these networks.

Just as the need to have an Internet presence with a static website became a necessity for any business (offline or online) in the past decade, the clear benefits of having social interaction on business websites are becoming the next step for any business to leverage the Internet to do more business.

So now, there are bowling alleys using Flickr to allow customers to show off their bowling skills and interact with other customers.  And then you have your local Mexican restaurant owner wanting to add social features to their sites where customers can review their food or atmosphere.  And some services based businesses are even going so far as to enable a chat amongst visitors on their sites and in their forums to discuss the company.

Social media really comes down to “user generated content” which can come in many forms such as customer or user reviews, blogs, instant messaging, comments, videos, and any other communications taking place on your site.

First, adding a social element to your site does have some business risk because the medium allows comments that can both help and hurt your business.  Social media gives power back to the people but this also means that competitors, unscrupulous customers and anyone else can use it to your detriment.

Second, by allowing user generated content on a site that you own, a myriad of legal issues come into play including privacy and intellectual property laws.

Given the unbelievable developments in technlogy (which will only continue) and the nature of the Internet where any content can spread like wildfire, the laws will never be able to keep up.

So, it is important that your terms of service or user policies be well drafted to give you the business flexibility and ownership over content to address both the business issues and the legal issues that may come up.

There will always be some risk to using social media elements in your business but the rewards will likely far outweigh the risks.  Even so, there is a lot you can do to minimize these risks by having well drafted terms of use, user policies and privacy policies governing any user generated content contributed to your website.

For any business, online or off, you should always be looking at complimentary services and products in your industry.  Then, you should go and strike business deals with those companies to package your products or services together or to cross sell to your customers.

This is very common in the online business world where affiliate, reseller and joint venture arrangements cause companies to grow over 1000% with just one deal.  This is because everyone wins.  Usually there is a revenue share so both businesses make more money and the customer gets high quality products endorsed by businesses they trust.

The biggest mistake you can make when you do one of these deals is to not reduce the business joint venture to a legal document.  These documents do not have to be complex but they serve an important purpose.  First and foremost, they document the business terms- this is important to make sure everyone is on the same page.  Second, they provide legal protections for both sides which is equally important.

One thing that savvy businesses like to sneak in is an exclusivity clause.  These come in many forms but, in essence, their goal is to restrict you from doing similar deals with others.  Now, there is a price for everything and so if you are getting such a unique deal or the other side is making a significant investment in the deal, perhaps one might be worth it.

However, in most cases, it is a trap that will significantly limit the growth of your business and options you may have later.  Let joint ventures thrive on meeting business objectives and not based on legal ties or legal requirements.