The Business Web 2.0

Have a number of recent announcements reduced Facebook's usefulness to members and also derailed any prospects of realising its estimated value?

To date, you cannot deny Facebook's rise has meteoric. From a social network for Harvard students, the past 4 years have seen it grow to 70 million visitors a month with members from across the globe. It reached a peak last year with Microsoft paying $246 million for a stake of just 1.6%, valuing the company at $15 billion.

But a number of recent moves have shown the future to be less rosy for the Web 2.0 hero.

With Microsoft having failed in its efforts to acquire Yahoo! (for now at least), it was rumoured that our all dominant friends in Redmond had called Facebook to discuss increasing their investment. They were reportedly told that Facebook wasn't for sale (although I think any businessperson worth their salt would probably say yes to a $15 billion valuation on a turnover of $300 million annually in the current economic gloom).

This week, Facebook has announced that the Facebook Platform they revealed last year -- essentially a platform for developers to build those cruddy applications that drive you mad -- is soon to go Open Source.

Now to me this has a few important implications for Facebook moving forward and none of them is positive. Number 1 is that it will be yet easier for third party developers to build and deploy applications that clutter the experience for users and generate more spam, possible contributors to a recent dip in visitor numbers. Secondly, this seems to potentially undo the good expected from an interface redesign that Facebook has been promising for a few weeks now and which was aimed at going back to the "clean" Facebook appearance of old, to enhance the user experience. Thirdly, how attractive is a company with an Open Source platform for others to exploit to new investors, especially notorious enemy of the Open Source state Microsoft.

Facebook has recently been back out to the markets with cap in hand looking for additionaly investment to reinforce its infrastructure ($1 billion on new hardware - WOW!), but now that it would seem most of that will go towards building servers for other companies to use for free with no clear return for Facebook in the whole thing, you have to wonder what the future Grand Plan is.

Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz

Just 3 days after Google seemed to have Web 2.0 enabled the whole WWW, it seems its plans for data portability have taken a knock-back. Facebook has written a blog post revealing they have banned Google Friend Connect from accessing its API and access to user data on its site.

TechCrunch has revealed that Facebook believes that Friend Connect breaches its Terms of Service by passing user data about without the user's knowledge:

"Now that Google has launched Friend Connect, we’ve had a chance to evaluate the technology. We’ve found that it redistributes user information from Facebook to other developers without users’ knowledge, which doesn’t respect the privacy standards our users have come to expect and is a violation of our Terms of Service. Just as we’ve been forced to do for other applications that redistribute data in a way users might not expect or understand, we’ve had to suspend Friend Connect’s access to Facebook user information until it comes into compliance. We’ve reached out to Google several times about this issue, and hope to work with them to enable users to share their data exactly when and where they choose."

Exactly how it thinks it violates its ToS is not very clear, as Google Friend Connect doesn't seem a whole lot different from Facebook Connect announced 3 days earlier.

The only way Facebook seems to have value as an organisation is from the number of people on its site and the advertising it is trying to make money from, so it seemed a little strange to me that it would allow others to take its prized assets and place them with others. The whole data portability thing feels too good to be true, although great news for other sites on the web that can benefit from Facebook's community dropping by.

I hope the matter gets resolved, although maybe it will keep the situation stalled for long enough for someone else to come along and present a better way of doing the whole thing -- such as an independent site holding user information and authorising social networks to use it, but it stays in the possession of the independent, chosen by the user...

I'll keep you posted.

Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz

I have long believed that the next wave of social networking is the proliferation of smaller, more focused sites appealing to special interests or specific needs. With MySpace and Facebook having opened our eyes to what the medium can do, I expect it to evolve toward sites with much more niche, relevant content -- good for us and good for advertisers, the lifeblood of free web sites.

The fly in the ointment, however, was that each one of these interesting new socnets would require me registering, setting up a new profile, remembering a new password and establishing yet another network of contacts. All necessary to enjoy the benefits, but tedious nonetheless.

News of the past few days suggests a solution to this problem may already be at hand however. And from who? Facebook and MySpace -- the very sites I'd be less likely to use as a consequence or it being easier to use the new more relevant sites.

I'll skip over the specifics of the announcements, as they are well documented elsewhere on the web, but the upshot is that MySpace, Facebook and even Google users will be able to take their details with them -- that's mainly their profiles, pictures and friends -- anywhere else they go. Well, anywhere if you use your Facebook identity, but only a few other sites if you use the other two.

What it means is that sites like mine at WeCanDo.BIZ will be able to allow users to bring over a profile already configured on another site, and easily invite friends from the other network to come and join them on our network. Or at least that is how it seeems; much like the OpenSocial announcements earlier this year, this is currently all Powerpoint slides and flipchart diagrams rather than real live examples that we can use today.

All the same, it sounds great. But I can't help wondering what's in it for the guys who have announced it. I guess if the web is to open up to become one big connected place where any website will allow you to log in with one identity, either Facebook, MySpace or Google would be happy enough you are using the identity they gave you. But I can't see the reasons it would take me back to their site, which is surely their ultimate aim. And I especially can't see how they are going to make money from it, unless they place a condition on the other sites that they pay for access to the data or carry their advertising.

Can anyone else take a guess at how they make money from this?

Let me be clear, I welcome the news. But I do wonder whether some of these announcements were made in a hurry to keep up with The Joneses and that once the commercial realities of the initiative sink in we'll probably never see any of it come to light.

Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz

Industry researches and analysts Gartner claims with its latest research document, entitled "Top 10 Things Retailers Should Know About Social Networks, and What to Do" that the medium is NOT yet ready for commerce. The report (visit http://www.gartner.com/DisplayDocument?ref=g_search&id=633007&subref=simplesearch for more details) warns retailers about leading an attempt to commercialise social networks which could backfire by driving active participants away, with the retailers getting tarnished in the process.

No doubt in the back of the Gartner guys' minds was the experience of Facebook with its Beacon advertising platform, received with hostility from users who had privacy concerns. Advertising rates, expressed as a cost per thousand clicks, are much lower on sites like Facebook than they are on better established internet advertising media such as Google's search site. The perception is that many people are on sites like Facebook, MySpace and Bebo to socialise in the most basic sense and don't appreciate being sold to while doing it. Perhaps they feel a conversation with a friend is being rudely interrupted by a salesman and are reacting accordingly.

But whereas it may be true of companies and social networking sites targetting consumers, businesses are showing willing to do business with each other online. My own website at http://www.wecando.biz has business people broadcasting details of their most urgent business needs and then inviting contact from companies that can help them. More old-fashioned online marketplaces are very common on business-focused social networking sites and money frequently changes hands between business people who start dealing on the back of the introduction the site provides them. The technology and methods are well established.

I'd assert that social networks ARE ready for commerce, but you need to be sure you are in a community that WANTS to do commerce before you can expect to see success.

Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz

Rumours are circulating that business-focused social networking site LinkedIn could, once again, be an acquisition target. Several months after the last set of rumours died out, Eric Eldon and Matt Marshall at VentureBeat (http://venturebeat.com/2008/05/05/whats-happening-at-linkedin-is-it-getting-bought/) report that a board meeting overran last week and seemingly this alone has got tongues wagging. Now everyone is looking at anything founder Reid Hoffman has said recently for further clues.

For those who aren't up on this recurring story, News Corporation was rumoured to be interested in buying LinkedIn last autumn as a complement to their Wall Street Journal business -- the demographic is perceived to be much the same between the two and LinkedIn would bring with it some welcome online revenues (suggested to be around $100M annually). But the rumours fizzled out as quickly as they had started when News Corp announced some other (unrelated) acquisitions instead.

Following the extended board meeting last week, however, the rumour mill has once again sparked into life with top of the potential suitors being... yep, News Corp. The match between LinkedIn and the WSJ still applies, gossips argue.

There was no talk of a value in the article I read, but US$1B - US$1.5B was being discussed last year. Since then, LinkedIn has grown another 5M members. So a higher valuation this time around?

It is probably fairly easy to place a true market value on LinkedIn, as it has a publicly listed competitor in Xing, which is on the Frankfurt junior exchange. Xing is smaller in terms of users (4M members as opposed to LinkedIn's 20M members), but it has a more international presence and seems to be earning more from each of them: it's Q1 2008 results revealed around US$11M in total revenues with around US$3.88M EBITDA. And its market cap? Just below US$300M as of close of markets today.

Line the two up along aside each other and the comparison would point to LinkedIn NOT being a billion dollar company in today's markets dominated by the credit crunch and panic over rocketing fuel prices. So with LinkedIn adding 1M new members a month currently, would its shareholders sell for half of what they thought they may get from Murdoch just before Christmas? I don't think so. Expect some interesting partnership news soon perhaps, but I don't foresee a sale for a little while yet.

Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz