ON FACEBOOK'S LONG-TERM STRATEGY (Part II)

AND SO IT BEGINS

Well, the de-portalization I talked about this past Monday regarding Facebook's long-strategy, has officially begun.  The roll-out of Facebook's long-anticipated platform strategy (aka F8) yesterday, is the top story on Techmeme right now. 

Michael Arrington at TechCrunch has a good summary of what went on at the Facebook conference, and how it contrasts with MySpace's strategy.

There's even the obligatory "exclusive" feature story on the whole strategy in a national business magazine, Fortune in this case.

Fortune's David Kirkpatrick summarizes kicks it off as follows:

"Facebook may turn out to be a lot more important than any of us thought. It has just launched a major change in its strategy that will transform its role in the Internet ecosystem and could create a raft of new opportunities for companies of all sizes.

No longer will Facebook consider itself merely another social network. Instead it is becoming a technology platform on which anyone can build applications for social computing..."

The short version is that Facebook is taking its two major assets - its 24-million-members (growing at about 150,000 per day) and its strong technology underpinnings - and making them available to all comers.

"We want to make Facebook into something of an operating system so you can run full applications," Zuckerberg told me, saying it would be analogous to the platform that Microsoft Windows provides for developers.

Outsiders can now develop Internet services on Facebook's infrastructure, he explains, that will have full access to all its members. Just as it is when someone writes a program for Windows, programmers won't need any permission from Facebook or any special business relationship with the company."

What does this mean for mainstream users in non-geeky terms?  Well, Fortune has some good examples:

"Imagine that when you shopped online for a digital camera, you could see whether anyone you knew already owned it and ask them what they thought. Imagine that when you searched for a concert ticket you could learn if friends were headed to the same show.

Or that you knew which sites - or what news stories - people you trust found useful and which they disliked. Or maybe you could find out where all your friends and relatives are, right now (at least those who want to be found)."

If Facebook is able to even partially execute on the promise of this strategy, it could pose a long-term dilemma for the mainstream portals.  Tactically, it makes a ton of sense for all of them to make sure their individual portal services are represented as applications within Facebook, thus leveraging Facebook's networked audience.

That's why, you have companies like Microsoft represented in the dozens of companies large and small, that have lined up applications for Facebook's big announcement yesterday (Mashable has a great post describing these applications).

But strategically, Facebook poses strategic risks for the major portals no less than what Google posed for Yahoo!, AOL and Microsoft back in the nineties, when they all used Google's search engine as an outsourced service.

For smaller Web 2.0 companies, Facebook could be their best friend in the short-term.  They potentially get substantial, and relatively inexpensive customer acquisition via Facebook, by making their services "applications" on Facebook's platform.

In that sense, Facebook's strategy is brilliant, since it makes a tail-wind out of the fact that the biggest problem facing hundreds of VC and angel-funded Web 2.0 startups, is to get massive, quick, inexpensive distribution.

In a post back in 2005, I'd said:

"...there is a real problem as the big portal companies go into the Web 2.0 world, and it's a possibly intractable one. 

Yahoo!, Google, Microsoft MSN/Live, AOL, (along with Amazon, eBay and Apple for a sub-set of the portal services) need to come to terms with the reality that most of their users WILL ALWAYS NEED TO have accounts at their competitors because they'll NEED TO CONNECT WITH PEOPLE AT ALL of those services.

In a Web 2.0 world, where by definition these services are about connecting with people across these services, these services are still competing on the traditional model of winner takes all. 

The underlying assumption by each player is that if one service can offer the latest and best X.0 version of each of the services in question that they'll have that customer's TOTAL online business for the indefinite feature.

The reality is that as a user, I'm forced to have accounts at ALL of the services because in an oligopolistic world of online services, most of the people I need to connect with could be using any of the services on any of the portals."

Facebook's newly announced strategy makes people and their networks, the next generation portal. 

It's a powerful idea.  But it's going to require Herculean execution in the coming months, on the part of Facebook and it's partners. 

It really is going to be an opportunity to witness one of the most daring Internet strategies in quite some time.

Comments

[KwangErn Liew]

Sure, it is a way to keep people in their social networking portal. Just as MySpace have the celebs.

But is it sustainable? There are alternatives like Twitter vs Jaiku. There's also a high possibility of user overlap between two services. Where's the sustainable edge? Or rather, the money in the business? Adverts? haha

[Amelia Torode]

This is a great post - thank you for bringing together a lot of thoughts that I have been having recently. Facebook is certainly the most interesting developement to my mind this year.

The difference between the way that Facebook have approached their future and the way that MySpace seems to be doing it is illuminating!

I have posted about this recently and there seems to be quite an interesting discussion going !

http://ameliatorode.typepad.com/life_moves_pretty_fast/2007/05/open_facebook.html