Sunday, May 27, 2012

How Facebook Might (or Might Not) Life Up to the Hype

Once upon a time there was a company called AOL that had a proprietary platform, something of a walled garden, and had many thousands of paid subscribers. It took down the walls, introduced its subscribers to the larger Internet, went public, got an insanely high stock valuation, merged with Time Warner and... the rest is history.

Once upon a time there was a company called Facebook that created a walled garden, invited many thousands of free subscribers to join, played games with the height of its walls - low enough to get search engine traffic, high enough to keep members from exporting their data to use on competitors' sites - but was primarily interested in pulling its members away from the larger Internet in favor of devoting most or all of their attention to its proprietary platform, went public, got an insanely high stock valuation (and yes, despite it's being a "flop" that valuation remains insanely high) and....

Will history repeat itself?

Today, with his portrait on the opposite side of the electronic page from a box that encourages his readers to log into the site using Facebook, and which touts content that is popular on Facebook, Ross Douthat complains that Facebook is an "illusion". He makes some good points about Facebook and the illusion of online community, although he often does so in a way that's reminiscent of my personal feelings somebody who doesn't "get" the appeal of constantly reviewing a Facebook wall for updates. Douthat seems to have forgotten his own personal history as a blogger. The best inference is that Douthat understands the Internet as a vehicle for the exchange and discussion of ideas, and even for self-promotion (as long as there's a quid pro quo), but doesn't "get" the frivolous side.

Douthat focuses on companies that bring the old world into the electronic age,
It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of nonvirtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door.
He's derisive of companies, no matter how successful, that are largely or purely electronic:
Twitter is not the Ford Motor Company; Google is not General Electric. And except when he sells our eyeballs to advertisers for a pittance, we won’t all be working for Mark Zuckerberg someday.
Never mind that one of the companies that is most often cited as digital-era success is Google. Were Douthat to spend a bit of time wondering what it is that Amazon, Apple and Google have in common, and what Facebook hopes to achieve, a concept mentioned above, the platform, might come to mind. Google, Apple and Amazon are engaged in a pretty intense battle to capture the mobile and tablet market, to push their own interfaces for the rental and purchase of electronic entertainment, and to grab as much market share as they can. The goal is not to sell "our eyeballs to advertisers for a pittance" - it's to dominate the future market for the rental and sale of electronic information, entertainment and software, and to get a healthy cut from each sale.

Why does Amazon offer Prime content on its Kindle and not on its competitors' devices? Because it wants you to buy the Kindle. It wants to own the platform, not be an app on somebody else's platform. And that makes sense: why would you buy an app that you can only use through the interface of another app, when you can get the same app, optimized for the hardware you're using, for the same price through the OS-manufacturer's platform? When Facebook admits that it cannot get traction in the mobile market it's, in essence, admitting its failure (to date) as a platform. People will play Farmville, and the like, in their browsers and Facebook gets a cut of the virtual sales, but on a competitor's mobile device Facebook is "just an app" the use to check up on their friends.

A company that Douthat forgot to mention, once the giant of the computer world, is Microsoft. Another company that is struggling to capture a significant foothold in the mobile platform market, and pouring an incredible amount of money into entering that space. The "failed" IPO generated many billions of dollars for Facebook that can be used to help it try to better establish itself as a platform and to compete with the established platforms. But it's facing an incredibly tough environment in which its competitors have established products and track records, and in which despite many billions of dollars invested in software, search platforms, operating systems and the like, Microsoft continues to flounder.

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