Facebook: The Next AOL?
The growth of Facebook is fairly astounding no matter which metric you use. Profiles, valuation, visits….it’s impressive to staggering.
For many, Facebook is becoming “The Web” or a large part of it. You have an inbox for communicating with friends, you can play interactive games (instead of watching TV game shows at night you can actually participate in an interactive online game show with your friends!), reconnect with lost friends and, via the choices you make, project a “virtual” image of yourself to the outside world. I have heard that users outside the U.S. view Facebook as more of an utilitarian and effective tool. “Less chicken throwing, more networking” might be another way to illustrate my point.
Entire businesses are springing up on Facebook. If you’re a Facebook user, check out “Mesmo TV”. It’s a small but growing company (started by an ex-Intrawarian) that is now run pretty much exclusively within Facebook. Yes, you know Facebook is a bona fide hit when you can say “I know someone who has started a company running on Facebook” at cocktail parties.
The risk of course for Facebook is the AOL dilemma. AOL took advantage of a new way of communicating - the Internet. Whereas the World Wide Web at that time was very hit and miss in terms of quality and content, AOL made it easy for the masses to use with graphics and rich content.
Yet over time the “closed” nature of AOL was its downfall. Both end users and content providers wanted freedom. In addition, AOL became very “uncool” and was considered a tool for parents: “The Internet with training wheels.” Lastly, advertising ran unchecked for the most part and, along with spam, greatly impacted the end user experience.
Similar arguments are being made today with respect to Facebook. These arguments focus on the fact that Facebook has a proprietary development language. Just as companies had to develop “an AOL version” and a “Web version” in the late 90’s, today companies are required to develop a version of their application to run on Facebook’s proprietary markup language. This was at the core of the recent “Open Social development platform” announcements prior to Christmas.
Yet one key difference between AOL and Facebook remains. Facebook allows developers who build applications to reap 100% of the revenue they derive from those applications. Perhaps an analogy to the physical world is that you have 20 acres of land and you want to set up a market. One model, the traditional one, is that you charge every vendor 30% of their earnings by way of payment. Your alternative is that you could divide the lot in half and let the vendors keep all their earnings and charge $5 per hour for parking. Then over time you select the most popular vendors and once you have a reputation established you raise your parking to $10 per hour…
AOL clearly followed the first path - demanding big fees to be present within AOL. Facebook is focusing on the second. However, one of the key differences between the physical and virtual world is that Facebook isn’t constrained by only having 10 acres. You would think that is a good thing. However, in this case it might actually become a problem. There’s no quality control and many Facebook pages I visit now appear to be “drowning” in data. I think that’s been LinkedIn’s point all along.
These are pertinent questions as we continue with the ongoing development of zAthlete. It’s a new frontier. How do we take advantage of the most exciting elements of social networking while avoiding the potential pitfalls. It’s an interesting challenge and the stakes are high. There are so many pundits on Facebook that weighing in hardly seems valuable. Maybe the best question is “What was the biggest reason for AOL’s downfall?” It will be interesting though to see if Facebook is another Google or AOL.
Let me know what you think.
Justin
January 18, 2008 at 4:07 pm
The hard part for me is deciding the proper scope for the various vertical social network sites that are starting to pop-up in the shadow of Facebook. Your Zathlete is obviously for athletics, but maybe it would be better to have a football-specific website, a baseball specific website, etc ? The more focused the social networking community the more tailored the social network experience can be. Then again maybe you can go too far in that direction and have just a California football social networking site, or a Bay area high school punters site.
Once you walk away from the general all-inclusive Facebook/Myspace social networking and provide exclusivity there seems to be so many ways to define your exclusivity (or your “vertical” as Intraware refers to it).
January 19, 2008 at 5:44 am
[...] justinbenson wrote an interesting post today on Facebook: The Next AOL?Here’s a quick excerptFor many, Facebook is becoming “The Web” or a large part of it. You have an inbox for communicating with friends, you can play interactive games (instead of watching TV game shows at night you can actually participate in an interactive … [...]
January 24, 2008 at 5:45 am
Thanks for the mention. I’m clearly already hooked on the Facebook drug but I did not start that way. I started with the philosophy that you can’t build a business being dependent on another company. I’ve since come full circle. How many companies are dependent on Microsoft for their business. If MS changes their Windows code do you think a few businesses would be affected. We are beholden to Facebook but we are now also on Bebo. We are planning to launch on MySpace as soon as they are ready. If Facebook wants to play games we can focus our efforts on MySpace. Similarly if Microsoft wanted to screw its developers, Linux will be ready to dominate. Microsoft and Facebook are platforms. I would never try to build a social site outside of Facebook. Trying to get someone to register for your site is hard. Getting someone to register for your site and invite all of their friends and to have those friends register is impossible. Getting someone to come back to your site is also hard. With Facebook you are one click away from a registration and another click away from someone inviting their friends. You are also one click away from a page that someone visits every day.