[Editor's note: This is an OpEd piece by David Gal, an assistant professor of management at Northwestern University]
Last year, Facebook chief executive Mark Zuckerberg suggested that a PC operating system was the inspiration for Facebook’s new “Platform.” With Platform, anyone could write applications for Facebook. Facebook’s in-house applications would get no special treatment, he declared.
The analogy to an operating system is appealing. For many years Microsoft’s Windows operating system has benefited from the large number of applications written by outside developers. People buy Windows, not necessarily because it is the best operating system, but because it has the most applications. Like Microsoft, Facebook does not have a monopoly on great ideas nor unlimited bandwidth, and a platform ostensibly allows Facebook to leverage the talents of the entire developer community to its benefit.
However, Facebook’s most important strategic asset is not its community of developers but its network of users. Does Platform build or leverage this strategic asset? I believe Platform was intended to leverage the network, but, in fact, it squanders it, by fragmenting the network across a large number of applications in each application category. Enter a search on Facebook for any category of application, from dating to chess, and you are faced with a large number of choices.
But aren’t more applications, as the Microsoft analogy suggests, a good thing? Abstracting lessons through analogy can yield unexpected insights, but analogies can be stretched too far. A large number of applications is a benefit to Microsoft Windows, because being able to run the largest number of applications is an important source of value for users of an operating system. However, the most important source of value for users of a networked application is the number of relevant users using the same application. When multiple applications compete for users in a network, then fragmentation results, and an important source of value is frittered away.
Won’t Darwinian selection ensure that the best application in each category will prevail? Maybe, but probably not. Darwinian selection does not work so well in a networked world. Multiple competing applications may coexist in a category, leading to diminished overall adoption of the category. Moreover, those applications that come to dominate a category will not necessarily be the best or the best-maintained; rather, they will likely be the first to attract a large number of users in a particular category. This is because in a networked application, having a large number of users may outweigh any functional benefits that a competing application can provide.
Summary
To conclude, Facebook’s focus should be on building, maintaining, and leveraging its core strategic asset, its network, and Platform is not well-suited to these goals.
First, platform does little to build the network, because while a large number of applications is an important reason for people to buy Windows, a large number of relevant users is the most important reason for people to join Facebook. In fact, rather than attracting users to Facebook, most Facebook applications acquire users through Facebook (and then get to split revenues with Facebook).
Second, useful applications are important to maintain the network, but the most useful applications are those that have the largest number of relevant users, that are well-maintained, and that do not require users to share their personal data with third-party developers. Platform applications are unlikely to meet these criteria.
Lastly, leveraging the network implies using that asset to pursue applications from which Facebook can derive revenue, such as dating, jobs, fantasy sports, event-ticketing, auctions, etc. By relegating these applications to Platform and focusing on advertising revenue through impressions, the user-base is fractured, and the value of the network is squandered.
24 Comments
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Bob said:
Professor David,
Yes, you are right, Mark Z needs to take your classes….sheesh when will you enter the real world?
–b
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Chris said:
Interesting… I wonder if facebook knows this and is simply taking advantage of outside ideas now and will eventually use your advice and “take over” those applications that generate significant revenue?
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Lex said:
Good point David but there’s one big mistake, “People buy Windows”.
Did you ever buy a copy of Windows? People are forced to use Windows, if you buy a pc it’s already there.
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John said:
David, you make some very good points. But…
Facebook received its $15 billion dollar evaluation based on the idea that they were going to become the ’social operating system’. The fact that they were able to raise $300+ mm at that evaluation is reason enough to prove that Platform was a unbelievable success for the company.
The Platform also spurned a tremendous amount of growth for the company. The press and hoopla around the whole thing was enough to brand Facebook in the minds of every single person in America.
By launching Platform, Facebook also positioned itself as the market leader. Every social network and silicon valley startup spun their wheels and used huge amounts of resources playing catch up and ‘me too’ to the Big Bad Wolf. Only now (almost 8 months later) is their second biggest competitor finalizing the launch of their dev platform (can we say loser?).
Its yet to be seen if Platform will translate into being what Zuck projected. They could scrap it in 10 months and still be miles ahead of where they were before.
To me, damn good strategic move.
and experimentation (causing other social networks to follow suit). Instead of -
Jeffrey McManus said:
You say that “Darwinian selection does not work so well in a networked world” but then you don’t say why.
Building its platform and building its network are the same thing.
Facebook’s platform has been around less than a year; it’s going to be difficult to make broad-brush generalizations about it (much less apples/orange comparisons to other platforms) for a while.
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Benjamin Parr said:
In my opinion, Facebook Platform was not about acquiring users, but about making Facebook more relevant as a tool for daily social and internet life. As Facebook matures in the U.S. market, it needs to fight off fatigue from lack of change and, more importantly, it has to make Facebook a relevant tool to those graduating students entering the business world. You are going to see vastly improved applications. Investment advice, tutoring tools, advanced information networks, and even bill pay are all going to appear on Facebook in the next few years as applications that can really allow you to harness the true power of your personal Facebook network.
Facebook applications are going to allow you to better harness your network and thus better unite the individual’s network in more useful ways than are now available.
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Chris said:
Any platform is vulnerable up until the point it reaches a critical mass. When the ratio of developers to users reaches a certain point, it becomes almost impossible to compete. Users choose Windows because of the number of available applications and developers choose to target Windows because of the number of installations (users). At a certain point they feed off each other and it happens to be a win-win situation, even if people would rather not see it that way. Before Windows reached its critical mass, it was vulnerable. But, OS/2 and Apple being the best suited to overtake Windows obviously didn’t execute well enough.
The Internet currently doesn’t produce an environment where sophisticated enough applications can be developed (at least not without a lot of effort) that take people’s focus away from desktop applications. HTML, Javascript, AJAX isn’t cutting it, especially with browser incompatibilities! We have more work to do with Internet development technologies before an Internet platform is going to be where people spend most of their time interfacing with applications.
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Thumbster said:
Yet another reminder of the old saying “Those who can do. Those who can’t teach.” You couldn’ be further from the truth. Facebook, or more generically any social networking platform, has significant advantages such as the ability to instantly add/configure/customize/network an application. This dramatically lowers the barriers to entry (correct on that point), but it also lowers the cost of switching for users. Yes, creating a standard (massive usage) creates a barrier to switching, but not an insurmountable barrier.
Frankly, “social networking” as application is boring to me and it may prove to be a fad. I don’t really care about the minor personal gestures of my 400+ friends. But the social platform is exceptionally compelling to me as a user, developer and visionary. Social discovery and vetting of application is huge. I’ll drop one app and add a competitor in 2 minutes. My friends will do the same if it offers a compelling value.
Your application of the old school metrics of the PC platform to a social platform ignores the low switching costs, social discovery of applications, incredibly low marketing costs and all of the other benefits of a social platform that will power future applications. The fact that one person in a dorm room can write a killer app that can spread virally is exceptionally powerful. That simply cannot happen on the PC. It can happen on the web, but having done it a couple of times myself, I can tell you it is costly.
Will Facebook become the ultimate platform, will OpenSocial win, will browsers encapsulate social connectivity across all websites/webapps, will the semantic web finally deliver? I don’t know the winner, but social apps are here to stay. Yes there will be a lot of crap apps, but the social fabric will help separate the wheat from the chaff.
Sorry, but I give your analysis an F :)
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Pran Kurup said:
Very interesting and insightful take on the topic. Facebook ended up with a huge installed base of users and then had to figure out a compelling need to retain the users or get them to continue to re-visit. The “platform” was one way to do it.
“platform does little to build the network…” Its a little unfair to blame the platform for this. I think its because the applications that have been developed so far haven’t been good or compelling enough.
I think the long term value of the platform approach is that Facebook acquired a huge developer community. By taking the platform approach Facebook has developed this new asset in its developer community. My guess is that this will pay off in (in ways it is hard to imagine now) the long run as web apps become more common place.
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Bob said:
>>First, platform does little to build the network, because while a large number of applications is an important reason for people to buy Windows, a large number of relevant users is the most important reason for people to join Facebook
Does that analysis include the millions of new facebook users that signup just to see all the new apps?
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Sean said:
Releasing the platform allowed Facebook to address the largest risk to their network: fatigue. Their biggest asset becomes vulnerable if fatigue from lack of change sets in and they being to leave en masse.
By releasing the platform, Facebook off-loaded some of the burden of keeping their users interested to other developers. In the end, that is much cheaper than trying to build enough applications themselves to keep people interested.
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David Gal said:
Some very thoughtful comments. To respond to some of them, my column is not an attack on Facebook. Facebook is a very smartly designed site, and the company has made many smart moves in its short history. Moreover, because the value of the network that Facebook has built is so great to most users, it will take a particularly egregious mistake (see, for instance, Friendster) to cause the network to atrophy. Nonetheless, Facebook faces significant challenges regarding how best to continue to build, maintain, and leverage its network.
As noted by several commentators, Platform’s most obvious benefits are towards maintaining the network, most notably the ability to quickly generate a large and diverse number of applications, and hence keep users engaged. However, on balance, I don’t believe the open nature of Platform represents the best way to create useful applications for reasons mentioned in my column; and also, because the sheer number and clutter of apps is overwhelming, confusing, and annoying to a significant proportion of users.
More importantly, however, I think Platform–in its current incaration–is a mistake, because it is counterproductive towards the goal of unlocking the true value of the network.
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Jitendra said:
Fascinating piece David…So you are saying that open platform based applications fracture user base and do not attract additional users, therefore its a bad idea.
I guess what you are proposing is a closed platform where applications are release like hit movies in a controlled fashion to ensure consistent user experience and in sync with the overall goal to grow the user base.
What does, such an approach, say about the long-tail dynamic proposed by Chris Anderson?
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Daniel Feygin said:
Disagree 100%.
Applications on Facebook will be different than applications on Windows. They will help people connect rather than fragment. While I agree than application integration is sorely lacking in Facebook, I am sure this will be a part of the platform and even if not — applications can interoperate off-platform through their own APIs. As a desktop application analogy, consider that you can work with somebody else’s Word documents in OpenOffice…
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jamescoops said:
“You say that “Darwinian selection does not work so well in a networked world” but then you don’t say why.”
Survival of the fittest implies that the best wins out but where you have network externalities this isn’t necessarily the case e.g. X application on facebook might not be the “best” technically or otherwise but wins out based on the fact that it was first to get to a critical mass of users (the network effect).
Think betamax vs vhs - betamax a better technology but lost due to network effects (more content, users went to vhs).
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David Gal said:
Addressing Jitendra’s comment about the long tail, as with any decision, there are tradeoffs. By positioning itself as an operating system, Facebook attempts to be all things to all people, a difficult, if not impossible, task, that also requires sacrificing much of the value of the network. By restricting access to Platform, Facebook sacrifices some application diversity, but with $300 Million and partnership agreements it can still offer a significant variety of applications, and, in my opinion, much more useful ones. To extend your movie analogy, Facebook and partners can release a few hundred well-produced movies vs. a million amateur film clips on YouTube.
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Chris said:
And people will pay to see well-produced movies, at most they might be willing to sit through some ads to watch a youtube clip.
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Zack said:
Gal has a really interesting angle on this, but people are getting lost in the Windows and platform analogies. Instead, focus on the question of open vs. closed that Gal is thinking about. Sure everyone wants to say open open open because in our hearts we think it is best. But it isn’t always best.
IBM’s stuff (software and hardware) is only partly open (a kind of controlled open via partnerships and selective support) and corporations regularly choose it over more open alternatives because of the benefits Gal describes - non-fractured, etc.
Everyone’s darling is Apple and a lot of what people like about their solutions is how well integrated and “clean” they are. This is achieved because they are relatively closed. In fact Apple is currently trying to create a platform out of a very popular product that has similar fatigue risks. Comparing the iPhone platform and how open/closed it is to the Facebook platform sounds like an excellent assignment for some b-school students.
Just think about what could happen on Facebook if they offered some great apps via great partnerships. Think Apple/Adobe, Pixar/Disney, Apple/Google (on the iPhone).
As a simple example, a Facebook/Outlook integration would make FB valuable to tons of business users that FB doesn’t reach today, and although a third-party developer could create this, the reality is that 15 different developers will create it and cause confusion and stratification, and thus frustration in the user base. If it came from Microsoft, everyone would use the integration and FB’s value goes way up.
Facebook Platform is the long tail approach. But 80% of the value is in the short part of the curve, and that’s what FB needs to capture. Which means hiring BizDev people and creating great partnerships with top-name established software companies (web, desktop and even enterprise). The trouble is that it would take the kind of “traditional” thinking executive that Zuck hates to get something like this done. This probably seems radical, but move MZ aside and put someone in there from IBM.
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Andy said:
LOL, I bet you have no idea on the technical side how facebook platform works. The operating system analogy is really an “analogy”.
The idea of facebook platform is “share your service”,vs. “share your content” as myspace or youtube.
Do most users first register on myspace or youtube then view the content or view the content first then register?
The real problem with facebook, as you hinted a little, is that it’s not meant for serious business.
They’ve got enough user base, enough applicaitons, but the questions is how to cash out? Up till now, no social network site is very sucessful at this. -
steven emery said:
Open social means that you can take your myspace profile and move it to any other website or to a strategic vertical location based website that caters to your cause. Evertybodies social (LIFE) existence will be based on there internet profile. Example i dont think any contractor would go tell a customer to see there myspace profile when you have a personalized social site like ContractorLocator.com to profile your business. thus get ready for a mass migration of users to the Vertical Social sites that best represents there interests. The person that owns the greatest collection of strategic vertical social networked web properties will win the Internet Game.
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FB dev said:
david gal said “because it is counterproductive towards the goal of unlocking the true value of the network”
You don’t spend enough time on FB it seems. Nor have you interviewed key developers. Otherwise you would have come to understand what is going at the core of the Platform.
Clearly the Platform is allowing approx 16,000 different experiments to run in parallel on understanding what the true value of the network is, which neither FB nor Gal knows yet. But the user base + hapless unwitting devs are helping us all understand what the true value is. By itself FB would be a 2-3 min per visit engagement… with many of the apps highly engaging users, the avg time per visit is far higher for some large set of users. Plugging in apps on top of a multitude of social and context graphs that FB provides, is one sure way to exploit and engage the FB user base. Possibly even bring in new users to engage with their friends on these apps.
On the other hand, FB is discouraging serious apps while spammy apps and games burn through the user base. So what started out as a reasonable experiment has quickly turned into a negative user experience for more and more users. Witness the 1m+ Group on FB for stopping all app invites. That’s a big screaming feedback billboard on the Platform… one which FB seems to be reacting in the wrong way.
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Karthik said:
“However, on balance, I don’t believe the open nature ….confusing, and annoying to a significant proportion of users. ”
I don’t think this is substantiated. If you want to find something you looking for it..and there are a lot of choices..and when there are really a lot of choices, there’s a need for a recommendation / categorization - basically some abstraction which is trusted.
“More importantly, however, I think Platform ……is counterproductive ….true value of the network.”
What do you mean by this statement? What is the true value of a network? and why is it counter-productive? Are some people quitting face-book because there is now a platform?
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Miles Lennon said:
Another possibility is that they could be closely observing popular applications in an effort to determine what becomes popular…then they move in for the kill…
e.g. IM clients
I really enjoyed this post, however, certainly insightful. The number of applications within categories certainly are deteriorating the network benefits.
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Adrian said:
Facebook could do more to help browsing the apps. When I search for ‘fun’, many pages of results appear, but the list remains the same even after clicking on the headers:
* Recently Popular
* Most Activity
* Most Active Users
* Newesthttp://www.facebook.com/apps/index.php?q=fun
No fun!
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