A catch phrase will go here soon.

Should you trust Facebook with your business?

10/9/2007

Today I spent the day at the “Graphing Social Patterns” conference in San Jose. The conference has a fancy name, but truth be told the event is centered around Facebook and Facebook applications.

Background: For those of you who don’t know, Facebook is a social networking site like MySpace or Friendster. Facebook announced a very powerful program four months ago to allow 3rd party developers to create applications inside of Facebook. These applications let you do things like play poker or share photos. On a business level this developer program allows Facebook to:

1. get free developer labor
2. generates tools for their platform and users
3. get free research into which features their users wants

In order to get these developers on board there has to be some payback. To date payback comes in the form of climbing the rankings of the most installed applications, and maybe some promotion for your brand.

No one is really making money off Faceback applications with the possible exception of a cottage industry in selling–wait for it–Facebook application installs. That’s right, the people with the most applications installed are selling application installs to the have nots.

Additionally, Facebook doesn’t give developers the ability to pull down the user information associated with their users. So, if you get 1M users for your chess game you don’t really “own” those users–Facebook does. This is a big point of contention obviously.

Facebook says they are going to continue to evolve the platform and open it up as much as users want. They say give them time it’s only been four months and their concerned about opening it wide because they want to protect users.

When I hear “protect users” in these open standards discussions I immediately think about AOL’s instant messenger client which never opened up and the Apple iPhone. Both of those companies say they are protecting users by keeping their platforms closed, and that is true to a point. Apple’s products work better in terms of stability because they are closed, and spam issues are somewhat minimized by AOL not opening up their instant messenger AIM.

However, the truth is that folks who are in the lead don’t open up. Why should they? It’s typically a HORRIBLE business decision to open up too much when you’re winning. Opening up creates competition, it educates your competitors on how your business works, and it allows folks to easily switch.

“Switching cost” in terms of AIM comes in the form that if you move to Yahoo IM or Skype you have to get all your friends to move over. That’s why over a decade later AIM is still a powerhouse.

So, the question for application developers is should they trust Facebook to open up their platform? It’s important to note that at no point today did Facebook say they would open up–they simply said they are going to evolve the platform, that it’s early, and that they will do what the users want.

Are those statements a major red flag? Feels like it. If someone wants to open up wouldn’t they just say “our intention is to open up slowly over time.” Maybe they would say “we’re going to get there, we just have to put safeguards in place.”

However, Facebook didn’t say anything close to that today. This again, reminds me of AOL which when faced with the request to support Jabber, the open source standard for IM, kept saying they would look into it. However, they are still a closed system.

Here’s the bottom line: Facebook will open up as much as they need to in order to win. The reason Facebook opened up their platform to being with was to compete with MySpace, which had blocked people from developing on their platform (and running ads for it). If Facebook finds that they can make a “half open” system and get to where they need, well, they will probably do that. If MySpace opens up–as folks expect them to–and catches up with Facebooks Application development program? Well, Facebook will probably open up even more.

In other words, this is a business decision not an emotional one for Facebook. As it should be. If Facebook were to be 100% open a competitor could come along and suck out all the value they’ve created. It would be really dangerous for Facebook to do this, and irresponsible with regard to their contract with investors.

If Facebook becomes a public company you can be sure that they will make there decision on how open to be based on one test: what’s in the best interest of their shareholders. In fact, they have a legal obligation to do so. Now, sometimes the interests of users and business are aligned, but not always. In fact, we all know that business nirvana is a monopoly -1 (i.e. a monopoly that doesn’t look like one).

Microsoft has had a “monopoly -1″ for decades. As a result they were able to crush Lotus 1-2-3 and WordPerfect and replace those “open platform” applications with their own. Apple was going to change everything and release us from oppression (remember the 1984 commercial?), but they went on to lock down the iPhone to the level of absurdity (i.e. bricking people’s iPhone).

So, should you trust Facebook with your business? Should build your entire business inside of Facebook–or even around Facebook?

Answer: You should trust no one with your business success. You should build your business around the most open platform in the world: the open Internet.

Does this mean Facebook is evil? No, not at all. Facebook has opened up 100x more than MySpace and Friendster, so in truth they are the leading example of openness right now. It does mean, however, that anyone who builds their entire business on top of a closed or semi-closed system is a fool.

Leveraging Facebook to get users for your website? Great! Use Facebook to market you website? Sure, go for it!

If you look at history the companies that built on closed–or semi open–platforms have gotten their asses kicked. Build for the open web first, and use these systems as icing on your cake.

  • http://www.johnasimpson.com/2007/12/28/10-building-blocks-to-business-success-on-facebook/ 10 Building Blocks to Business Success on Facebook | John A Simpson

    [...] CEO of Mahalo.com blogs about Facebook [...]

loading
English Bulldog

Hello, my name is Jason. Welcome to my blog on the interwebs. You can reach me on twitter @jason and by email at jason@inside.com. My Skype is jasoncalacanis, and my mobile phone is 310-456-4900.

I only pick up numbers I recognize, and in terms of emailing me, the best strategy is to write short, blunt and to the point requests. I can quickly respond to short messages, and many times I simply don't have the time to read five page pitches. In terms of taking meetings, I only do that after reviewing an actual product (not a business plan). So, the best time to ping me is when you have mockups or an alpha site. I don't read business plans, and I've never written one.

Other twitter accounts you can follow: Inside.com, Ticker, This Week in Startups and LAUNCH Festival

Archives