The Battle for Conversations over Facebook 'Like'

A version of this post first appeared in VentureBeat


Facebook's recent announcements over its open graph and the manner in which it impacts privacy has been the point of debate for the past few weeks. The developments are certainly a cause for concern from a end-user perspective (see VentureBeat writer Kim-Mai Cutler's analysis on how facebook and Google have the ability to build highly accurate social composite of you, the Facebook user), although I would view them as a key stepping stone in Internet players' attempts to weave a social web. Open Graph is Facebook's bold attempt to try and structure the web by organizing content and behavior around the web. Facebook's move to create such a massive social graph, with interconnected discrete data points, on the face of it, is indeed a welcome move. It tries to bring a sense of order to the chaotic manner in which the web has expanded. However, if privacy issues are a cause for concern for consumers, the other major stakeholder in this graph, the publishers, are not without their share of risk too. For these players who are already grappling with a decline in their traditional business and the slowdown in online advertising, the lure of becoming Facebook-friendly is indeed high. But, does that mean publishers have no other option but to welcome Facebook with open arms? Are they in danger of becoming commoditized in a situation where Facebook builds a much stronger and larger advertising-supported ecosystem than their traditional enemy, Google? These and many more questions are on top of the mind for publishers. While the questions are pretty clear, the answers are significantly more complicated.

Traditional publishers have been under significant pressure for a while, given the declining state of print. Consequently, most have been attempting to build a strong online presence that encourages engagement and virality. In this context, it is probably right to take a step back and look at some of the efforts that publishers have taken to drive their online businesses vis-à-vis the evolution of online advertising, which to-date has remained the primary means of making money for most publishers on the web.

Advertising on the web has evolved from display advertising in the initial days of the web when content was mostly static. With websites starting to become interactive, focus began to move to content that users were actively looking out for, and thus evolved search advertising. Going forward, as players such as Facebook and Google will increasingly attempt, advertising is set to shift to a new paradigm yet again. This next big opportunity is around conversations, where social connections play a big role in driving uptake of both content (think story recommendations) and commerce (think product recommendations). A real world example, albeit currently under a cloud, is that of Blippy or the more recently launched Swipely, the social network where members share all of the purchases on their credit cards and then build conversations on top of these transactional details. And it is precisely conversations that Facebook has in its crosshairs. The opportunity to build a strong database of real human interactions around third-party generated content is what Facebook is looking at. And in doing so, it is relying on users to provide the data and publishers to provide the content.

To be fair to publishers, most of them had begun to realize the importance of a social web around their content quite early and have over the years tried to add social elements provided by third-parties. For example, they have started off with enabling commenting and emailing on their content, then progressively adding sharing features and then warming up to Facebook/Twitter when it came to using authentication systems that lowered entry barriers for new visitors. Some content players such as BusinessWeek and The New York Times have gone one step ahead and even attempted to create a complete social service (Business Exchange & Times People) on top of their content.

So where does Facebook's recent moves leave these publishers? A quick look at the pros and cons of enabling social plugins for publishers should help:

The Pros:

· Traffic is one of the most obvious benefits. Facebook's 400 Mn, and growing, network provides an audience that is ready to consume, share, and (hopefully) pay for content. (Of course, Facebook currently does not have any payment solutions for third-party content, but the potential for using Facebook credits for micropayments on publisher websites cannot be ruled out) For smaller publishers, there probably exist more incentives around traffic and engagement than for the larger players. For these players, they now have in their hands a highly cost-effective way of tapping into the social web. For the larger players, though, the challenge around effectively monetizing online audiences remains.

· There exists future potential for publishers to be part of Facebook's chosen 'partners' if, and when, they come up with an advertising solution. I must say though, the signs sure point to a Facebook-controlled ad network that will allow both self-service and premium brand advertising based on the treasure trove of behavioral data that Facebook is beginning to accumulate

· The potential to add 'value' to the publisher's audience. Readers wound undoubtedly benefit from the knowledge that comes with seeing popularity of content amongst their social network. Indeed, the sheer momentum of hundreds of millions of users is enough to give the perception of value to the end user!

The Cons:

· In my view, Facebook's "Like" effectively dis-intermediates the reader-content producer chain by propping up as an intermediary. By telling the reader what stories she's supposed to be reading, Facebook takes up the role of an intelligent recommendation engine. True, Google and other aggregators have been doing similar recommendations where they list the most popular stories on their sites. However, by adding a social layer to it, overnight, Facebook recommendations make tremendous sense where the real life social network of a user determines their online content consumption trends.While this is great from a end-user perspective, sadly, one cannot say the same when it comes to the publisher. By encouraging publishers to install the social plugins on their site, Facebook takes a vantage position in terms of gaining access to publisher clickstreams. For any business, a key to success remains how close they are to the customer in the value chain. For publishers who are going through a particularly trying time, the challenge is all the more pronounced. Sure Facebook adds value to their content, but then, by diverting conversations back to its site, Facebook is encouraging fundamental changes in user behavior where conversations, irrespective of whether they are on content/product/service/friends, are kept inside Facebook, effectively making the subject of the conversation a commodity.

· For their participation in the Facebook open graph, publishers get access to profile data that they could use to target ads on their sites. However, user behavior on other sites, for example competitors, or even on Facebook, is not available to publishers. That data resides with Facebook. While usage patterns of their website will no doubt be of value to publishers, however, Facebook effectively limits publisher understanding of the overall user behavioral trends by limiting access to usage. Such overall trends can be critical when publishers look to venture beyond their core business and want to understand their user-base in greater detail. Ofcourse, all of this does not rule out the possibility of Facebook launching a highly targeted behavioral ad network, building on top of data that publishers themselves volunteered!

· Despite all the positives from the Facebook initiative, the fact is that it is a diversion from their day-to-day business and probably marks a shift in focus. Publishers now need to spend significant time with developers in trying to understand the various ways that they can wrench value out of the whole social ecosystem. The system surely has benefits, but, they are more likely long-term.

· The impact of Facebook's initiatives, particularly when a significant number of publishers are considering erecting paywalls is highly debatable. Monetization of online audiences has been a tricky proposition for publishers, and they are increasingly trying out multiple experiments to figure out the best possible solution. In such a situation, having social plugins that share the content 'likes' of a pay user with their non-pay friends is likely to result in an array of links that will likely work against the brand of the publisher, given user limitations at getting past the paywall. Of course, Facebook could potentially come up with a solution similar to Google's first-click-free program.

· Lastly, the risk of relying on a single all-encompassing platform hold true even in case of Facebook. The recent outage of the open graph search API for an extended duration highlights such risks. Of course, the recent outage could have been a teething issue, but that doesn't take away from the vulnerability of a system where all nodes feed into a central network.

Facebook's initiatives have been compared with Google. Indeed, many believe that "like" can potentially replace Google's famed PageRank methodology of determining the best search result. While that might be a stretch, I do believe Facebook has learnt significant lessons from Google's experience with publishers, and accordingly is expanding its reach. While Google first built out the tools and offered it to consumers, and consequently is facing significant heat from publishers, Facebook is taking the smart way out. By making publishers a core component of their initiative right from the word go( large publishers including CNN and The New York Times are some of the select partners that Facebook is working with) Facebook appears to be positioning itself as a friend-of-publishers. The fact that it has taken just over a week for over 50,000 websites to sign up for the plugins is ample proof of the fact that its approach towards publishers appears to be yielding results.

All said and done, Facebook's initiative towards organizing the web, as it deems fit, appears to be a move that is fraught with multiple long-term implications for all stakeholders involved, be they users or publishers. As I noted at the beginning of this post, there appears to be no clear-cut answer to the question of if publishers should warm up to Facebook and offer their clickstream data on a platter. But if they do decide to go ahead and partner, it seems judicious that they take a clear view of the pros and cons before jumpting headlong into this global social media party, where the host and guest both are Facebook, and everyone else and their conversations are purely incidental, or more scarily, collateral.

Why platforms like iPhone and Twitter are becoming control freaks

This post first appeared in VentureBeat.

Small app developer shops have had a great couple of years. Facebook, Apple, Twitter, and a host of other platforms opened up and let these third-party developers build games and other apps to entertain their users, and in the process allowed developers to build multiple monetization channels as well.

It was a great move for the platforms — all those cool apps brought in more users and kept those users coming back. And it was great for the developers who would otherwise have found it hard to drum up an audience for their apps. But it looks like that trend is probably in danger.

In recent weeks we’ve seen both Twitter and Apple clamp down on developers, adding new restrictions to their developer agreements. It looks like the platforms are eager to take over what appear to be lucrative business opportunities those developers helped to build. Now the question on everyone’s mind is, exactly how much control are the platforms going to be exerting here? It may be that wresting back control from the stakeholders is imperative if a platform is to grow, but if so, how do the stakeholders that helped popularize a platform benefit?

Whether we’re talking about Twitter launching an ad network that could challenge other Twitter-based ad players, or Apple’s recent decision to ban Flash-to-iPhone conversion tools, or the fact that Apple’s new iPad device lacks external ports, it’s clear there’s a trend towards control here. Apple has never been considered an open system, but the actions of the past week indicate that it’s going even further down the road to a closed ecosystem. And then there’s Google’s Android platform. Android’s raison d’être was to enable openness and allow the partners in its ecosystem to decide how closed they want to go. Yet, Google, as the curator of the platform, decided to introduce a new distribution channel and differentiate between phones based on its own criteria. Meanwhile, social networking giant Facebook has been busy, too. The social network has long said that its users should be in charge of their own privacy settings. But a few months ago, it changed tack and took on the role itself.

Why is this happening? Well, there are many reasons, but they tend to fall into three broad categories:

Erect Entry Barriers: Facebook, Google, and Twitter have all grown and scaled on the back of the open web (where access to services has been unfettered by any gatekeeper and consumers were free to switch services with minimal switching costs). They have been able to attract users rapidly because the web has been an open playground, with users gravitating to services that best served their needs. This is very unlike the physical world, where competition is highly uneven in different geographies and location inherently serves as an entry barrier. Increasingly, these companies are recognizing that while the open nature of the web has been a great contributor to their growth, they need to erect entry barriers one way or the other to limit competition if they want to sustain growth at the same rate. By taking steps to control access, features, development tools, or buying out competition, successful companies are looking to raise their control over the markets that they operate in. Apple’s lack of USB ports (primarily aimed at discouraging sideloading) and Google’s “Superphone” requirements for its distribution channel are both indicators of such entry barriers. These barriers will usually not be obvious to the end-user, but they certainly limit the ability of third-party players to operate and interact at will.

Build Platforms that Can Scale: As companies grow larger and more successful, a key decision they face is how much to invest in new products versus how much to continue investing in their existing assets. While there are pros and cons to both approaches, when companies decide to continue investing in existing assets by, for example, building new products/services on top of existing ones, they’re more inclined to protect that investment by exerting more control over their base products. Apple’s approach with its various product lines clearly exemplifies this approach. Starting off with the iPod ecosystem, Apple built the iPhone. On top of the iPhone OS, it has now built the iPad. Note that the iTunes way to interface with the product remains a constant, while the underlying core remains the same for apps (iPod Touch, iPhone and iPad). Having built a platform that Apple has now scaled to multiple products, the company has to ensure that it retains significant control. And that explains its latest move to keep companies such as Adobe at bay — companies that have a professed multi-platform multi-screen strategy that obviously gets in the path of Apple’s single-platform, multi-screen strategy. Similarly, consider Google’s new online-only distribution channel for Nexus One. A movement towards distribution is a first for Google, since the company had thus far allowed device vendors to forge their own distribution tie-ups. While these are still early days to gauge the success or failure of this channel, the intent is pretty clear. As Google continues seeing increased uptake of Android, it wants to involve itself not just in enhancing Android features and providing web services on Android phones but in expanding this presence to newer areas.

Grab the Early and Late Majority Crowd: A key feature of most web and PC-based services remains that most users tend not to tinker around with default settings. The implicit understanding is that if they are comfortable installing/using a service, then they are fine with the settings suggested by the provider. And this user behavior is exploited by service providers to further their goals. For instance, Facebook’s recent privacy settings changes are aimed at making as much profile info public for as many users as is possible. In a similar vein, Twitter’s move to acquire Tweetie or that of releasing a semi-official Blackberry app can be seen as an attempt by Twitter not only to control its platform but also to encourage users to access it through their own application. The underlying assumption here is that, while the innovators and early adopters ( read up here on the theory around diffusion of innovation) might care too hoots about using an “official app”, it is the next wave of people that are the low-hanging fruit. And to this large mainstream crowd, Twitter does not really want to project the impression that the service is significantly separate from the platform. While there are no obvious advantages to using one app over the other currently, that will likely change, as future versions of “official apps” are likely to be more tightly integrated with Twitter’s monetization model and will potentially offer more incentives for users to stick to them.

Given these advantages, it’s clear why platforms would feel the pull to take more control over their offerings. But does enhanced control really deliver in the long run? An answer to that question might come from a different set of players, the mobile operators.

Having started off with highly controlled and closed ecosystems, mobile operators have flourished offering their services in a lock-down fashion. However, of late, they have begun to realize that while closed systems are great for milking consumers, they are not sustainable in the long-run, since the more closed a system gets, the easier it becomes for a disruptive entrant to create havoc. You only need to take a look at the rapid collapse of operator walled gardens (where users were not allowed to browse any mobile site beyond the operator portal and a few select partner sites) and spread of flat-rate mobile data plans (that enable unfettered access to the mobile web) to gauge the pace of this change. Consequently, they are now attempting a painful transition to open ecosystems.

It is ironic that a key reason these mobile operators are beginning to change their business models is because they’re trying to emulate the very same Internet players who are now closing up their offerings. And as the two worlds — mobile telecom and the Internet — converge, expect players from both categories to switch business and operational models more often.

In the meantime, what does this mean for stakeholders in the Internet platform ecosystems — the app developers? Are they going to be left high and dry? I would reckon not. Going by past evidence, closed ecosystems, while being tremendously helpful to the platform owners, still allow for opportunities to be made at the edge of the ecosystem in areas the platform owner deems too small to bother with. The difference in this situation is that there are now a lot of edges — wide edges — where innovative developers can create products that can stand on their own whilst leveraging the larger platform. At the same time, services that offer limited value-addition will fall by the way as the platform owners decided to expand.

So it is really up to stakeholders to decide if they want to be offering me-too services or building out truly innovative offerings. But keep in mind that while platforms are going to continue to exert control over their ecosystems going forward, that strategy will only last until the next disruptive company springs.

In the Battle for Online Identity, Privacy is the Casualty

Content consumption on the Internet is rapidly becoming mainstream. Given the increasing amount of content that is moving online, and the dis-proportionate influence that online services are having on our day-to-day lives, Internet based companies are in a race to have a ringside view of our online behavior. And what better way to obtain such data than to be the gatekeeper to the web. It is in this context that leading players such as Facebook, Twitter and Google are trying to push their 'connect' products, or so to say, reach extenders. These single-sign-on applications help websites across the web significantly cut down on the efforts required by a casual browser to interact with them, whilst providing Facebook & Co with a goldmine of usage data. While companies such as Facebook will market this as a manner of enhanced utility for the consumer, however, the truth remains that control and knowledge of usage behavior online is indeed going to be a key determinant of online success. As it is, targeted advertising on Facebook is taking advertising to hitherto virgin territory. On the mobile platform, Google is attempting to become this gatekeeper that offers 'open' access into which only the company has 'closed' access. Its recent acquisition of Admob now ensures that Google has a ringside view in to consumer behavior on this emerging platform. 

Facebook has already embarked on a monetization path of user data. The recent about-turn that Facebook did with respect to user privacy settings marks the beginning of a change that is likely to become more prevalent across the web. While most major online players have thus far resisted the allure of making user data public, Facebook's stance marks a major shift for the Internet as we have known. For, the company's changes impact over 350 million people directly. And despite what the folks at Facebook would have you believe, the question over how much privacy is 'enough' privacy has yet to be answered clearly by the consumer. The fact that consumers are sharing more and more personal info does not mean that everyone wants it to be revealed to a global audience. Likewise, the increasing social nature of the web  and the rise of conversational media can hardly be an excuse for Facebook or other online players to reset established privacy rules. The sad part is, revealing personal info and looking at monetizing them through search is the easy way out. If Facebook or other social networks indeed wish to remain relevant over the long term, they should probably spend more time in creating alternate business models.


As our day-to-day lives and our online personas start intertwining and integrating more often, with usage of smartphone applications, we can only expect more such developments. Facebook might have been the first, but they definitely wont be the last !