Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Facebook entering a new phase

Posted by Arun Uday on May 28, 2007

The big news in the social net world last week was Facebook’s announcement that they were going to open up their platform to third party application developers. For those wondering what the big deal is (after all, almost all web sites these days provide APIs to interact with them), this is a little different. In this case, application developers can develop widgets that will work within the FB system. FB promises that this will be an open system and there won’t be any elaborate clearances that would be required. The third party applications are promised full access to the entire database and will be free to monitize their work in any manner they want.
There has been some amount of excitement and may be even hype around this announcement with some even suggesting that this could pave the way to FB becoming the new OS of social networking. Lets try and analyze this briefly.
 Even discounting other fears of how FB would handle challenges such as spam, security threats and the drag that such applications would cause on page loading times – all of which would almost certainly arise because of this move, the main issue from a business standpoint that I’m still not clear especially w.r.t claims that FB could be the next “OS of the internet” is – Monetization. As of now, there are only two models of monetization that have really scaled up on the internet viz. – eCommerce and advertising. As far as advertising goes, it is pretty clear that Google has completely tamed the beast here. If there is any platform that can possibly stake claim for the title of “OS of the internet”, it is Google AdSense. I say this not only because it is the largest advertising platform by a long way, but also because to be called the OS of the net, the platform has to “sit” over other websites (like AdSense) rather than forcing all other publishers to work within the confines of that site(like FB). So, it seems unlikely just from what FB is attempting to do, that it will pose any serious challenge to AdSense. Lets also not forget in this context that the much larger MySpace itself utilizes AdSense for its advertising.
Coming to e-commerce, from the announcements, it is not clear as to whether FB would be taking a cut from any transactions happening through such embedded apps. But, there could be some window here for FB to do so especially for companies targeting the college teens that form the bulk of FB’s user base. But again, this is a far cry from being called the OS of the internet for the same reasons as above – question mark w.r.t scalability of such sales to significant proportions and also because, it still won’t be a secondary service that would integrate with other sites – a requirement to be called an “Internet Platform”. Is FB an interesting company and Mark Zuckerberg, a smart kid – little dispute. But, will FB be the OS of the internet? I’d have my doubts.

One Response to “Facebook entering a new phase”

  1. myspace layout stealer

    then again, the opposite could be true

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