The OpenSocial Business Model: Will the biggest social containers win?

November 2, 2007

By David Berlind

I asked two questions during the Q&A session in today’s announcement between Google and MySpace that MySpace would be embracing Google’s recently announced OpenSocial framework of APIs, with executives from both companies. The first question (which I’m really still waiting for an answer on) had to do with how two or more social networking sites will handle the thorny challenge of reconciling dissimilar identity management systems (when the integration involves the exchange of personal profile data). You can see in that post what some possible answers are, but what’s not clear is how, in the demonstration given, unique MySpace IDs are mapped to unique Flixster IDs (the demo involved the incorporation of Flixster social movie reviewing service directly onto MySpace profiles).

Another question I asked had to do with business models in an OpenSocial world. I probably didn’t phrase it during the press conference as well as I should have. But going back to the example of how OpenSocial results in the embedding of Flixster functionality into larger “social containers” like MySpace; It occurs to me that, to the extent the exporter of functionality (Flixster in the demo example) relies on advertising as a business model, the idea that a lot of people might begin to experience an exporter’s content through a container (where the container gets to serve the advertising instead of the exporter) could result in a cannibalization of the exporter’s traffic (and therefore, its ad revenues). Meanwhile, the container (MySpace in this case) benefits, doesn’t it? After all, using the demo as the example, MySpace gets to serve advertising around Flixster’s content. Today, lots of sites (eg: FaceBook) go out of their way to prevent other sites from using HTML’s frames to frame their content and serve their own ads against that content (FaceBook for example purposely “busts” HTML frames).

Therefore, could the OpenSocial network lead to a world where the biggest and mightiest “social containers” win? As you can hear in the full audio podcast we have of the press conference, Google CEO Eric Schmidt answered that question as follows;

It depends on your view of how network effects happen and whether you think a single dominant player comes out in any of these spaces. The history of the Web says that that’s not the scenario that will happen. The history of the Web says that there is enormous diversity in what people are interested in and that people who are willing to take a bet on an open platform whether its a developer or leading site like MySpace get the benefit of a larger pie. It does not end up as a zero sum game. Your question can be rephrased in exactly the same question we asked 20 years ago and 10 years ago and history says that the Internet wins and that the principles of openness; that people can extend things; that in fact they end up winning because the pie gets so much larger in all scenarios.

Given the way FaceBook has come on so strong in the last few months, it would be hard to argue with the idea that no single dominant player will ever emerge so long as the platform is open. But what about a small handful of dominant players like Google, FaceBook, and MySpace. Yes, OpenSocial is also about unlocking whatever profile data you have in your MySpace vault and making it portable to other social networks.

But how often will people really switch after they’ve invested so much time in building their online personas in a MySpace, a FaceBook, or both? Maybe they’ll do it, but my sense is that they won’t do it often or lightly in which case only a few will get to rise to the top. Put another way, Flixster may indeed be a container as much as it is an exporter of data to other containers. But in which direction will most of the data flow? To or from Flixster? My sense is that people will lean in the direction of uber-containers like MySpace and FaceBook (FaceBook has not announced support for OpenSocial) to be their primary containers and specialty function sites like Flixster to serve up data into their containers.

I’m not saying that sites who primarily end up in the role of serving data to larger containers can’t win. But, if you ask me, the existence and adoption of OpenSocial will force many advertising-driven sites back to square one where they’ll have to think hard about how they’ll sustain themselves while also participating. One thing is for sure. Much the same way a day doesn’t go by when some company doesn’t carve out a niche in the FaceBook universe for itself (knowing full well that FaceBook is where the sunshine is right now), support of OpenSocial will be a checklist item for any site that’s in a position to serve data into the larger container sites. Those sites may not realize it right now. But when Google turns on its container (and you know it’s gotta have one coming or it wouldn’t be doing this), a lot of people will have their moment of clarity.

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Widget Master

November 2, 2007

By Victoria Murphy Barret

RockYou is Silicon Valley’s latest Web sensation. It exists solely thanks to the recent rise in social networking sites. RockYou creates frivolous, mini Web applications that exist on social networking sites such as MySpace and Facebook. RockYou’s popular Superwall, for instance, lets Facebook folks put graffiti–words, photos, videos–on their “walls,” which are public sites where members post messages. Another, called Zombies, encourages people to “bite” friends. Virtually, of course. No joke.

Since RockYou’s founding two years ago, 90 million social networkers have downloaded its applications. For this, RockYou is making more than $100,000 a month in revenues showing ads alongside its mini-applications for brands like AT&T and Sony, as well as by plugging other developers’ mini-apps (for a fee). The pitch to advertisers: We are where the kids hang out. Yet RockYou doesn’t know much else about its customers. Facebook doesn’t share data about members’ ages, locations, education or anything else it might know.

Jia Shen, the 27-year-old co-founder of RockYou, sat down with Forbes.com recently to talk about how to make money selling snack-size software and what Google’s new open platform means for Facebook and MySpace.

Forbes.com: How did RockYou begin?

Jia Shen: We started two years ago noticing that everyone on MySpace was trying to “bling out” their pages. But there was no easy way to do it. We decided to put together a slide show tool. It took one week to build. I worked while I was on vacation in Japan. In one month, we had 100,000 people using it. Then in three months there were one million.

Impressive growth. But were you making any money?

None. You can’t advertise on MySpace. Facebook changed that. So now we’re like any other Web site: We make money on page views. Sony Pictures wanted to promote the film Resident Evil and used our Zombies application for a sweepstakes event.

We also advertise other applications and take a cut. Yahoo! created an application that lets you post music videos on your Facebook profile page. Yahoo! had 8,000 downloads after one month, which is pretty slow. We started promoting the application in banners above our own applications. In a single day on our network of applications, Yahoo! got 120,000 downloads.

What is your initial reaction to Google’s new open platform for social networks?

We’ve been helping Google for a while on this. In theory, it should be very cool. We tested it out with an application called Emote (This is a collection of happy, sad, flirty smiley faces). Before all these networks required different code, and it took us three days to re-write the same application for Facebook to get it to work on Orkut. With the new standards, it took us just 30 minutes to make the same application work on Plaxo. The real test comes two months from now. How many companies will really give us real estate on their Web sites?

Will Google’s open platform give a boost to less popular social networks like Orkut, Friendster and the Hi5?

Sure, if it yields them more applications, it gives people more reasons to flock to their sites. Web traffic isn’t yet a zero-sum game

Is this bad news for Facebook? Will developers spend less time on Facebook apps?

People are making real money on Facebook. So there’s risk in going elsewhere. Am I really going to spend time going after Orkut’s Brazilian audience? I’m more likely to focus on the U.S. market. Facebook is still growing nicely.

Do you worry that the social networking sites, particularly Facebook, will start launching their own applications and compete with outside developers?

It is always a worry, but something that we’ve lived with since day one. MySpace eventually built a competing slideshow, but we already had big penetration, with a diverse set of widgets. Facebook does do little feature creeps here and there. But everything they’ve done so far has been non-competitive.

What will Microsoft get from its deal with Facebook? (Microsoft announced in October a $240 million investment for a 1.6% stake in Facebook, and is serving ads on the site.)

This isn’t traditional brand advertising. But my belief is that Microsoft didn’t want only access to the ad network. Microsoft wanted to make sure no one else got Facebook. (Google was reportedly bidding.)

What were you doing before RockYou?

I came to Silicon Valley in 2000 after majoring in computer science and electrical engineering at Johns Hopkins. The first start-up I landed at failed in three months, so did the second. I thought I was the kiss of death.

But I have a short attention span, so it was fine by me. This company is changing so much I may as well be working at a different place every three months.

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Facebook Could Challenge Google And Become The Remote Control For The Web

November 2, 2007

by Stephen Wellman

On Aug 16, the blog Facebook Insider reported that TripAdvisor acquired Where I’ve Been, the top travel-related application on Facebook. While TripAdvisor later denied the rumor, the ensuing story exposed something: The exploding number of applications on Facebook. Thanks to its Facebook API program, Facebook is fast becoming the front page for much of the Web.

In July, I argued that Facebook posed a challenge to professional networking site LinkedIn. While I stand by that assessment, I think that in that post I didn’t go far enough. Given just how fast Facebook’s API program is growing, Facebook may present an even more interesting challenge to the Web. Facebook could shape up as a rival toGoogle, Yahoo, and even search itself.

By integrating more applications into its platform, Facebook is trying to transform itself from being just a social networking platform to becoming a full-interactive control panel or remote control for the Web. Unlike earlier attempts to do this — think of the portal model of Web 1.0 — Facebook has designed its API system so that users can access all the Web sites they want without ever leaving Facebook, or opening new Web pages. I suspect that Facebook will expand this functionality so that eventually the entire Web can be accessed through these widgets.

In short, Facebook wants to become the locus of control for much of the user’s Web activity, letting the user seamlessly share travel information, pull in news updates from blogs like TechCrunch, or send questions to the user’s social network with apps like MyQuestions.

If you will allow me to extend the remote control metaphor, Facebook users no longer have to go “out there” in the rest of the Web to get new sites, they can pull them through Facebook, either with invites from the app providers or, more effectively, through their social network itself. The cumulative impact of this could be huge. Just as the remote control gave birth to the couch potato (the ultimate passive TV viewer), so too could Facebook change the game for Web use.

If users no longer need to search to find new cool Web applications, they won’t need to use Google, Yahoo, or MSN as much. Instead, they can rely on Facebook for finding new applications. Now, I don’t think this would mean the end of search, but it could reduce its importance pretty significantly. If that happens, Google loses power and Facebook gains it.

What do you think? Do Facebook and its exploding universe of applications pose a real threat to Google and search in general?

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Internet companies: Social graph-iti

November 2, 2007

A NEW fad is sweeping across Silicon Valley, causing excitement, confusion and hyperbole not seen since the dotcom bubble. It began in May, when Mark Zuckerberg, ten days after turning 23, took the stage in a San Francisco warehouse and announced that he was opening up Facebook, the social network he founded at Harvard University, to outside programmers. Anyone can now build little programs, or “widgets”, into the network. To illustrate his idea, Mr Zuckerberg projected onto the wall behind him a “social graph”—a pattern of nodes representing Facebook users and the links among them.

Since then Facebook and the idea of the social graph have become the favourite, if not the only, topic of conversation among the valley’s geeks, venture capitalists and internet moguls. Mr Zuckerberg compares his graphing of human connections to the work of Renaissance mapmakers. Facebook is growing furiously and may catch up with MySpace, the biggest social network. Outside programmers have added about 5,000 widgets.

One of Facebook’s investors estimates the social network’s revenues in 2007 at only $100m, mostly from selling ad space, with tiny profits. Nevertheless, the internet’s giants—Yahoo!, Microsoft and Google—are offering to buy Facebook or a stake in it for a price that would value the firm at many billions. At a Facebook conference on “Graphing social patterns,” panellists said the firm may be worth $100 billion and that it is the new Google.

How much of this is hype? Facebook has made two genuine breakthroughs. The first was its decision to let outsiders write programs and keep all the advertising revenues these might earn. This has led to all kinds of widgets, from the useful (comparing Facebookers’ music and film tastes, say) to the inane (biting each other to become virtual zombies). The entire internet industry reckons this was clever and is planning to copy it. This week MySpace said it would open its site to outside programmers. Google, which owns Orkut, a social network extremely popular in Brazil and parts of Asia, is expected to do the same soon. Facebook’s second masterstroke is its “mini-feed”, an event stream on user pages that keeps users abreast of what their friends are doing—uploading photos, adding a widget and so on. For many users, this is addictive and is the main reason they log on so often. Jerry Michalski, a consultant, calls the mini-feed a “data exhaust” that gives Facebook users “better peripheral vision” into the lives of people they know only casually. This mini-feed is so far the clearest example of using the social graph in a concrete way.

Silicon Valley’s craze for the “social graph”, however, is overdone. The term has been around in computer science for decades, says Eric Schmidt, Google’s chief executive, so it is puzzling that Mr Zuckerberg should get any special credit for using it. “We have address books, and the sum of the address books is the social graph,” he says. Companies such as Plaxo, which help to synchronise address books, and Google itself, which has a primitive address book in its web-mail service, plan to turn these books into fully fledged social graphs that can do useful and productive things, perhaps including new variants of mini-feeds.

This analogy to address books points to an important limitation for social networks, such as Facebook, compared with older sorts of network, such as the postal or telephone systems. These benefit from Metcalfe’s Law, which says that the value of a network is proportional to the square of the number of its users. In other words, the more people have phones, the more useful they become. This “network effect” leads to rapid adoption and puts up barriers for new entrants.

But unlike other networks, social networks lose value once they go beyond a certain size. “The value of a social network is defined not only by who’s on it, but by who’s excluded,” says Paul Saffo, a Silicon Valley forecaster. Despite their name, therefore, they do not benefit from the network effect. Already, social networks such as “aSmallWorld”, an exclusive site for the rich and famous, are proliferating. Such networks recognise that people want to hobnob with a chosen few, not to be spammed by random friend-requests.

 
 

This suggests that the future of social networking will not be one big social graph but instead myriad small communities on the internet to replicate the millions that exist offline. No single company, therefore, can capture the social graph. Ning, a fast-growing company with offices directly across the street from Facebook in Palo Alto, is built around this idea. It lets users build their own social networks for each circle of friends.

So are Facebook and its graph really worth many billions? From an advertiser’s point of view, says Rishad Tobaccowala, the boss of Denuo, the new-media unit of Publicis Groupe, an advertising company, Facebook is so far anything but the new Google. The search giant does have traditional network effects in its advertising system, he says: it aggregates advertisers and sends them to potential customers who have expressed specific intentions by typing search queries. But Facebook has only “large crowds who are communicating without expressing specific interests”, says Mr Tobaccowala. On Google, advertisements are valued; on Facebook they are an annoyance that users ignore.

Facebook might nonetheless be suited for other sorts of marketing. Reuben Steiger, the founder of Millions of Us, a marketing agency for social networks and virtual worlds, says that brands need to design “experiences” that use the social graph to engage groups of friends. If a wrestling association, say, wants to drum up ticket sales for an upcoming bout, it could build a widget that turns users into wrestlers and lets them fight bad guys and win gifts, while making them aware of the brand and the match.

But that possibility hardly justifies the sorts of valuations bandied around for Facebook and other social networks. Such valuations, indeed, may reflect a misunderstanding of the social graph. For bigger companies such as Google, the graph is simply the web of links among its many users. It can be used to make existing services more useful. But Google increasingly views such utilities as “features, not products,” says Sergey Brin, its co-founder. Facebook, like many hot start-ups in Silicon Valley, has some fantastic features, but maybe not much more.

Source:Economist.com


Will Google’s OpenSocial API Program Kill Ning?

November 2, 2007

By Stephen Wellman,

Google this week stormed into the social networking world and stole Facebook’s thunder with its new OpenSocial API program, an effort to create an open standard for creating and integrating applications into social networking platforms. While the rest of the blogosphere is pondering Facebook’s fate, I want to ask another question: Does OpenSocial spell the death of Ning?

For those of you who don’t know, Ning is startup that offers a platform designed to let users create and manage their own social networks. Ning has been around since 2004 and it has a list of big Silicon Valley boosters and investors, including Marc Andreessen of Netscape fame.

Ning is targeted at both consumers and businesses.Ning is trumpeting the OpenSocial platform and its participation in it. Ning’s leadership thinks that OpenSocial will allow Ning to explode (in a good way).

I am not as convinced that OpenSocial will be so good for Ning — or other social networking upstarts either. But for the sake of this post, I will focus on Ning.

Ning’s real value prop to date has been its ability to let users build fully custom, white-label social networks. While competitors like Facebook are aggregations of social networks (not just one social network), Ning’s advantage has been its ability to offer more user customization. Lots of different networks using the same platform behind the scenes vs. bunches of networks on the same interface.

Now, with the addition of Google’s OpenSocial APIs, Ning will offer the same kind of functionality as the rest of its rivals, including Facebook’s arch-nemesis MySpace. So if the entire social networking universe will soon offer integrated application functionality using the same standard (assuming Facebook signs on, which I think it will) what does Ning bring to the party?

Hear me out on this. I see how OpenSocial benefits MySpace. And I can see how Facebook might benefit from this too, despite all the naysayers who claim this move could kill Facebook. But, how does Ning really benefit from this?

As I see it, OpenSocial potentially gives Facebook and MySpace the ability to beat Ning at its own game. Assuming Facebook and MySpace integrate OpenSocial and these APIs give users the ability to create and integrate new kinds of applications and functionalities, why not give users the ability to create their own standalone networks in these respective platforms? Why not launch custom networks on both of these platforms and skip Ning all together?

As I see it, all Facebook, MySpace, Orkut, etc. have to do is add an additional level of interface customization and they can easily take Ning’s market right out from under it. Why use Ning when you could build a professional network for a large company on Facebook or a custom network for a movie or TV show on MySpace?

What do you think? Will OpenSocial spell the end of Ning?

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Facebook’s dilemma: To be OpenSocial or not to be

November 2, 2007

By Dan Farber

Facebook is now the lone wolf, the only major social network not to partake of Google’s OpenSocial APIs. This is understandable. A radical change of course is not easy to contemplate. Facebook is the social networking leader, not in raw numbers but in momentum, demographic goodness and potential. The company was greatly lauded for opening up its platform and social graph to empower developers with APIs and a markup language.

Now Facebook is facing the hordes, 200 million foot soldiers–members of competing social networks. Google, MySpace, Six Apart, Ning, Bebo, hi5 and other social networks are giddy with delight in that now, in the name of greater openness than Facebook and comparable functionality, they have a Trojan horse to stalk Facebook, which has been rapidly colonizing members across the globe.

Developers are obviously delighted because they can leverage their code across multiple social network “containers.” Users will far more utility as popular applications spread beyond Facebook, and more developers get into the game.

Facebook’s has some immediate challenges. From a press perspective, the company has not been very transparent regarding its thinking on OpenSocial.

Facebook’s official statement as of yesterday was:

Despite reports, Facebook has still not been briefed on OpenSocial. When we have had a chance to understand the technology, then Facebook will evaluate participation relative to the benefits to its 50 million users and 100,000 platform developers.

In fact, Facebook has been very much aware of OpenSocial within the last week and talking with Google’s OpenSocial team. Facebook team members attend last night’s Campfire 1, where OpenSocial was formally rolled out, but weren’t ready to talk to the press, somewhat like deer caught in the headlights.
In contrast, MySpace, which was going down a similar path to Facebook with its own APIs and markup language, found out about OpenSocial about 36 hours before it was launched, saw the light and created some compelling demos with Flixster. MySpace’s uphill battle to compete with Facebook for the most valued users just got much easier.

All of this is a clear sign the Facebook is carefully weighing its options, and unsure as to how to deal with the shifting landscape. This dilemma comes just after Facebook was celebrated for its $15 billion valuation and Microsoft alliance, a validation for 23-year-old CEO Mark Zuckerberg’s and Facebook’s crown as the new prince of Silicon Valley.

Facebook could continue to plow ahead with its own APIs and markup language, maintaining its walled garden approach.

Analytics firm Compete points out that Facebook attracts a different set of entrenched, core users than MySpace and other competitors. “It will be difficult for this group to leave, and questionable as to whether they would even want to,” said Compete’s Max Freiert.

Facebook members have strong loyalty to the service–50 pages per day per person on average, according to the company. That is a position of strength. Facebook has built a service that people are flocking to by the millions per month, growing users at more than 3 percent per week.

But a downside is that its competitors and developers will paint Facebook as a pariah hiding behind a walled garden.

This could impact how members of the community think about their social networking home base. The scenario would not be much different from a political campaign–one unintended, ill-timed scream and Facebook’s members could lose faith and move their support to another service, which have been newly empowered by the OpenSocial APIs.

It’s a tough choice for the young company. Funding is not an issue, but pride and doing the right thing for users are. Zuckerberg has said that not providing users with more control over their data on Facebook is a flaw in the service. That would indicate that more openness is good for users, and developers.

Bottom line, if the OpenSocial APIs give Facebook and its application developers what is needed to build great applications, then it seems like a no-brainer to grit their teeth, revamp the platform as needed and embrace the more open APIs.

This choice doesn’t mean that Facebook will end up with lowest common denominator or just me-too applications. The likely scenario is that social networks (the containers for applications) will develop extensions that leverage unique aspects of their platforms and provide some differentiation.

If Facebook has a significant competitive edge because of its pioneering development platform, then adopting OpenSocial makes less sense. And on a practical front, giving Google de facto control of the core APIs for user profiles, friends and activity streams will be a cause for discomfort. On the other hand, so far Google is taking input from partners (who are also competitors) as the API specs have evolved.

Anil Dash of Six Apart, a member of the OpenSocial fan club, sums up the bigger picture of what is going on:

It’s not true to say that Facebook is the new AOL, and it’s oversimplification to say that Facebook’s API is the new Blackbird, or the new Rainman. But Facebook is part of the web. Think of the web, of the Internet itself, as water. Proprietary platforms based on the web are ice cubes. They can, for a time, suspend themselves above the web at large. But over time, they only ever melt into the water. And maybe they make it better when they do.

For reference, Google and others have been chipping away at the proprietary Microsoft iceberg, but it is melting very slowly into the water and continues to mint money for itself and its ecosystem of developers.

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Take That, Facebook!

November 2, 2007

By Wendy Tanaka

Google got back at Facebook on Thursday, announcing that MySpace has joined the growing ranks of social networks that have committed to use its new platform for developers of applications for the sites.

The addition of the News Corp. social network heaps pressure on Facebook–which recently chose Microsoft over Google to be an equity holder in the company–to sign on to the new set of standards, dubbed OpenSocial. With MySpace, developers gain instant access to the world’s largest social network with 115 million users. Facebook, which rolled out its own developer platform last spring, has 51 million users, less than half of MySpace’s members.

At a press conference to announce the partnership, Google and MySpace executives declined to comment on whether Facebook will join OpenSocial. Vic Gundotra, vice president of engineering at Google, assured reporters gathered at the Internet giant’s Mountain View, Calif., headquarters that the company has reached out to every major social network. “We want to see it adopted by everyone,” he said. “We’re not announcing further partnerships now. We anticipate more momentum now.”

MySpace Chief Executive Chris DeWolfe is confident the new platform will “become the de facto standard” for application developers.

Google had been expected to officially announce the OpenSocial platform Thursday, but reports about it surfaced Wednesday.

OpenSocial will allow developers to build tiny applications that can be used across many social networks, boosting traffic and advertising on their sites. Google and MySpace said the main benefit of the platform to developers is that it standardizes how applications are created.

“Not rebuilding and rebuilding on different standards … will be great for developers and end users,” said DeWolfe, who took part in the press conference at Google’s Mountain View, Calif., headquarters. “One of the big trends on the Internet is that users want to consume content when they want it and how they want it.”

Google Chief Executive Eric Schmidt said Google and MySpace have been working together on the platform for more than a year. It had been rumored, however, that MySpace would launch its own developer platform.

Executives declined to comment on how all the companies that have said they will use the standards, which include Friendster, Hi5, LinkedIn and more than a dozen other social networks, will make money from the platform.

At the conference, Joe Kraus of Google’s JotSpot wiki product said applications embedded on MySpace Web pages, for example, will foster “more interaction on MySpace, which means more time spent on the site and more ad revenues.”

Questions about privacy were also raised. Joe Greenstein, chief executive of applications developer Flixster, another partner, said Google doesn’t have access to partners’ user data. “Google is spearheading the initiative, but Google doesn’t touch the data, doesn’t own it.”

Developers were expected to gather at the Googleplex on Thursday night to test their applications on Google’s Orkut social network.

Some of these developers might also be building applications for Facebook. But if Google’s platform is easy to use, these developers might be tempted to pour their hearts and energies into one platform more than another.

Mark Zuckerberg, are you paying attention?

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