Social Media: Facebook commoditizing the social map June 13, 2007Posted by jeremyliew in business models, Consumer internet, distribution, facebook, social media, social networks, user generated content, viral, viral marketing, web 2.0, widgets.
Facebook is transforming a lot of social media companies right now with its platform release, and its getting a lot of well deserved coverage.
1. (Open) Platforms always beat (closed) applications, therefore Facebook platform is a winner and an advantage over Myspace
2. Facebook did a pretty good job of it.
– Its technically sound
– Its highly viral
– Third party widget/app developers have economic freedom to keep 100% of revenues
3. If you’re not large or careful success can beget failure as usage volume overwhelms your servers
4. Underground apps are being released outside the Facebook application directory (due to issues or bottlenecks with application approval)
and they need to find an alternative way to seed their growth
On 1. and 2. I agree, but with a quibble. As Seth Goldstein points out:
In 1999 I sat down with Brad Silverberg of Ignition VC who Microsoft recruited out of Borland in the early 90’s to become the lead developer and project manager of Windows 95. Never has there been a more valuable platform. He described 3 things that platforms needed to have:
* wide distribution
* application developers making money
* good tools
Let’s test those three axioms against the preeminent platform play of our time, Google:
* Wide distribution? YES
* Application developers making money? YES (if you count all the adsense publishers)
* Good tools? YES (all the adwords and adsense self-service goodness)
Now let’s test these axioms against Facebook:
* Wide distribution? YES
* Application developers making money? NO (at least not yet, I will comment on 3rd party Facebook developers such as Slide, Rockyou, and AttentionSoft)
* Good tools? YES
Marc is right that app developers can keep 100% of the revenue that they make, but today that revenue isn’t much. As I’ve commented before, we need a standard for social network advertising, and until that standard emerges, ad revenue growth will be slower. But this will come in time, and so we can expect the Facebook platform to grow as well.
Unsurprisingly, the other big social networks (not just Myspace) have been rocked by the success of the platform and are all racing to build competitive responses.
On 3., where Marc seems to primarily base his conclusion on iLike’s experience, I side with James Hong who says:
I disagree with this. iLike’s application may have been particularly heavy, but it is not inconceivable (in fact I think it is more likely than not) that people will come up with massively popular apps that are not as machine intensive as ilike’s particular application might have been. Combine that with the fact that facebook allows advertising, and the fact that managed hosting companies exist, and i think it is quite feasible for 2 guys and an idea to scale.
Two of the companies I’m invovled in, Flixster and Rockyou, combined have four of the top twelve apps on Facebook. They have certainly worked hard to keep up with load issues, but none of them have struggled as much as iLike, partly because iLike has so many users, partly because they were already scaling outside of Facebook, and partly because their apps are lighter weight.
On 4. I think Marc overemphasizes the importance of being in the application directory. While we techcrunch readers obsess over the directory (I reload it at least once an hour when I’m at my PC!), the data I’ve seen suggests that the key drivers of virality are (i) profile virality (ii) invite virality and (iii) feed virality, with very little growth coming from the application directory at all.
However, to me, the most important part of the Facebook platform is that it commoditizes the social map. A lot of social media companies have built their value in creating a social map. For many broad based social networks, where communication and self expression are the key activities, the social map largely IS the value. When I was at AOL a few years ago and social networking was just beginning, we considered opening up the AIM friends list as an API to commoditize the social map and allow others to build on top of it (we didn’t do it in the end… sigh…). These companies are most threatened by a world of commoditized social maps.
What this forces social media companies to do is to build value on TOP of the social map. Yelp does a great job of this – the byproducts of their members communication are rated merchant reviews, information that has lasting value. For Flixster it’s movie reviews and ratings. For Rockyou, its photos. For iLike, music preferences and affinities.
Not all facebook apps build value on top of the map, and despite their virality, they are the ones that may be the most business model challenged on a standalone basis. Examples here include Slide’s Fortune Cookie, Rockyou’s “x me” and Graffiti. While these may have value for distribution or user acquisition, they don’t add much value on top of the social map, despite their popularity.
I’d be interested in hearing from readers examples of other apps that both DO and DO NOT add value on top of the social map.