But Not Exactly How They Think
I tried to post these comments on a prominent blog, but apparently they didn’t make the cut. So, I hope someone else finds them interesting and useful.
The social web is evolving to be complicated. Lots of players have identified the potential in connecting people together. Companies like MySpace, Friendster, and Facebook have been pioneers in discovering the value of these personal connections. Consolidation was inevitable as network effects draw more people to a dominant network. Facebook is that network today, and they have massive scale and inertia that will buffer them from making some mistakes. They are splitting their efforts between being a consumer destination (a portal) and being a social platform for developers. Now they are starting alienating everyone at once.
Through the pressure cooker of public opinion, Facebook is shaping the conversation around social networking in a direction that doesn’t necessarily work to their advantage. Frankly, as a portal, they are acting like a 1980s AOL. In the 80s, AOL was how to reach people online. AOL keywords were all the rage. Until people figured out that AOL didn’t add any value and, in fact, just got in the way of the relationships companies were trying to build with their customers and partners. As soon as I started seeing companies advertise Facebook URLs (e.g. facebook.com/mycompany), I thought of AOL keywords. A vocal minority of Facebook users are concerned with their shrinking privacy, too. Generally, I don’t think consumers worry that much about privacy issues. But given a better alternative, they might take flight. Like they did from Friendster.
As a social platform, they are taking plays out of the 1990s Microsoft playbook and alienating people who are investing in their platform (and attracting users). They even have their own version of the famous “Halloween Memo” (written by a classmate of mine, incidentally). Zynga is questioning whether to continue their investment in the Facebook platform or to build their own destination site to host their wildly popular games. The total daily active user count of all Zynga games combined is nearly the total number of Facebook users (okay, they have 70 million active users overall; lots of people play more than one game). Zynga doesn’t want to pay 50% of their margins to Facebook. I’m not surprised. 50% of margin hurts. 50% of margin is a big motivation to start investing in your own platform.
I think of myself as more of a pragmatist than an ideologist. But it certainly seems that the pressure Facebook is applying to the system will either make companies and users collapse, or it will blow back against them, reducing their importance. We won’t know for another 5 years which result will happen. But there is visible, measurable support for a project by four NYU students. At this moment, it is 1400% oversubscribed for its “seed” round of funding ($10,000) on kickstarter. And they still have two more weeks to raise money. I’d be willing to bet that they will make it to $200k or beyond, rivaling the funding that we received at Ringside Networks from our Tier 1 VC. That is a sure sign that things have changed.
In my next post, I’ll talk about what attributes may make a solution attractive to companies and users in this emerging environment. I’ll also talk about how you might cope with the changes if you’re participating in social networks today.
Update: Diaspora succeeded in raising just over $200,000 (got that right!). That will buy a lot of Red Bull-and-pizza-fueled coding.
Update: VentureBeat just offered a similar opinion about Facebook being like AOL. I’m not sure (yet) that Facebook will dodge mediocrity.
