May 25th, 2007

Facebook Platform Could Be A Google-Like Market-Driven Growth Engine

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Facebook Platform, which allows companies to build applications — and entire ad or fee-driven businesses — inside Facebook is a brilliant move, which could given Facebook the opportunity to become the next Google. The secret to Google’s success with AdSense was sharing revenue with publishers and letting them figure out how to optimize the revenue. At launch, Facebook isn’t taking a cut of any revenue generated by businesses using the Facebook Platform, but it could easily do so.

Following the crack cocaine model, i.e. give it away for free then charge once users are addicted, businesses that achieve profitable growth through Facebook would have no choice but to accept a revenue share agreement. Facebook is wise to let this Platform grow without friction at first — and, as Arrignton points out, there is an elegant viral growth mechanism for adoption of applications available through Facebook Platform:

But there is also a crucial viral component – when a friend adds an application, it is noted in their news stream on their profile. Clicking on the item brings you to the app, where you can add and/or interact with it yourself.

With Facebook users driving adopting of apps and app creators focused on optimizing the value creation for Facebook users, Facebook can essentially sit back like Google and reap the benefits.

Arrington is also right that Facebook is the anti-MySpace. MySpace has taken the old media, un-Google-like, un-Web 2.0 approach of trying to control all of the revenue, including blocking and, when necessary, acquiring third-party applications (e.g. Photobucket).

There are clearly risks to this strategy, but I don’t necessarily think they are that great. Brad Stone in the NYT piece asserts:

Facebook might also inadvertently turn itself into a launching pad for other companies that could eclipse it — in the same way that YouTube rose to prominence because MySpace users found it an easy way to add video to their MySpace pages.

But this isn’t really a risk because YouTube didn’t eclipse MySpace — YouTube actually helped MySpace by making the service more valuable because videos could be embedded.

The opportunity for Facebook is not just to take a cut of revenue from businesses built on its platform, but also to charge to users for the Facebook service — if Facebook effectively offers users a full integration of everything that is important and useful to them online, then there’s a good chance they would be willing to pay for it.

Advertising isn’t going to be the right business model for everything — just because Google made it work for search, doesn’t mean it can be optimized for every platform.

Regardless, Facebook is now the company to watch.

Comments (18 Responses so far)

  1. Facebook Platform is already having a huge impact on the crowded and competitive Web 2.0 start-uplandscape, most notably in the social music category, i.e. applications that allow users to share with others what songs they listen to and to discover new music by seeing

  2. Facebook Platform Could Be A Google-Like Market-Driven Growth Engine » Publishing 2.0

  3. applications and widgets in its pages. Facebook is opening its API to the world. What that means is that anyone is now free to build entire online businesses — including content businesses — on top of Facebook. Scott Karp says the move gives Facebook the opportunity to become the next Google. The first widgets are coming from predictable sources such as Amazon and Digg. But the possibilities are endless. Certainly some of the smartest folks in the media business have jumped on the Facebook train. Take a look at this post by Rob Curley of

  4. Facebook Platform Could Be A Google-Like Market-Driven Growth Engine

  5. Facebook Platform Could Be A Google-Like Market-Driven Growth Engine 25/05/2007 (Publishing 2.0)

  6. all-time: Knob Hockey. Click here for the latest. Look for some new stuff later today, … Viral Videos That Will Change Your Life: Why are we just now hearing about Gay Robot? Seriously, you people need to tell us about stuff like this. [Gay Robot] Facebook Platform Could Be A Google-Like Market-Driven Growth Engine Facebook is wise to let this Platform grow without friction at first ? and, as Arrignton points out, there is an elegant viral growth mechanism for adoption of applications available through Facebook Platform:

  7. + Discussion: Publishing 2.0, Business 2.0 Beta, Don Dodge on The Next …, The Social Web, Vecosys, TechWeb, Webware.com, Read/WriteWeb, michael parekh on IT, Neowin.net, Confessions of a Non-Profit …, Rev2.org, Scobleizer, Pronet Advertising

  8. Facebook Platform is already having a huge impact on the crowded and competitive Web 2.0 start-uplandscape, most notably in the social music category, i.e. applications that allow users to share with others what songs they listen to and to discover new music by seeing

  9. The business contact networks are a bit too…business-y…..and MySpace is a glitter-covered mess. Facebook sits somewhere in the middle. It proves the value of usability. It’s easy, transparent, and does what it says on the box. It’s also a hugely, hugely powerful revenue platform

  10. of forming and gaining momentum. I can rather comfortably state that Facebook is the new Google. A few thoughts: Facebook is growing tremendously fast…check out the statistics – 3% per week growth, 50% of users return to the site daily, etc. Facebook as platform confirms the ability of facebook to reach beyond their own programmers and users…and create a space of innovation and collaboration with other providers: “Following the crack cocaine model, i.e. give it away for free then charge once users are

  11. Facebook Platform Could Be A Google-Like Market-Driven Growth Engine » Publishing 2.0 ” Facebook Platform, which allows companies to build applications — and entire ad or fee-driven businesses — inside Facebook is a brilliant move, which could given Facebook the opportunity to become the

  12. It’s time for Face Book to Pay Up.

    The End of the Plantation system.

    I would like to help a bit in bringing about a new era on the Internet. We can call it web 3.0, or 2.5. I will leave the definition to others that are better at this kind of thing.

    This will be the era of a true revolution in the power of site members. An era where members have the power and the ability to be rewarded monetarily for the value that they add and the revenues that are generated from their work and participation.

    The recent announcements by Face Book that they are going to be the next OS, or the next platform, or the next goggle, reeks of egotism and self indulgence as well as a master slave mentality. In the bravado of the announcements that spewed forth from the reality distorted world of Face Book what was left out was the untold fact that Face Book would have little or no value if it were not for it’s 25 million members.

    The hard fact and truth of the matter is that Face Book makes hundreds of millions of dollars off of the backs of its 25 million members and has no plans to share the true wealth (money) of the revenue they generate with them.

    Does Mr.Zuckerberg or anyone at Face Book believe that they add more value to Face Book than the 25 million members ?

    If the answer is no then the revenue generated and the value added to Face Book should be shared monetarily with the members that have have generated the revenue and added the value. Without the members Face Book would have little or no Value.

    We now live in a technical age where a close to approximate monetary value can be assigned to the value and revenue that Facebook members add to the company. This fact can no longer be hidden, it can be found and it should be known by all of the members that generate the wealth and revenue.

    Why cant we see a graph on Face Book that discloses to the members the amount of revenue that is generated from them in terms of revenue generating partnership deals and advertising ?

    Why cant Facebook give an equitable portion of its ad revenue directly to its 25 million members ?

    Of the revenue that Face Book generates, as a percentage how much is given back to its 25 million members in a monetary form ?

    The advertising revenue that is generated by Face Book come from the actions of the 25 Million members, not the Face Book staff, so the members should receive the lions share of the revenue

    How much stock in the company do the 25 million members that generate hundreds of millions of dollars for Face Book own. Because the 25 million members generate most if not all of the revenue and value for Face Book, shouldn’t they all be stock owners ?

    As a group the 25 million members add value to the company and generate revenue, as a group they should own stock in proportion to the vaue that the add and the revenue that they generate.

    How much is Microsoft paying Face book for the rights to serve ads to Face Book members? Since the value of the ad deal is probably based on the amount of members that face books has, it would make sense that the members should be given a share of the money that Microsoft has paid to Face Book for the rights to serve the ads. Mr Zuckerberg and the rest of the Face Book team should give the 25 million members the money they deserve for the value that they add to Face Book.

    If yahoo would have acquired face book for one billion dollar, would any of this money be given to the 25 million members that have given Face Book the one billion dollar valuation ?

    For a one billion dollar acquisition that is by and large based on membership size as well as advertising revenue generated by the members; it seems that giving each of the 25 million members 1 million dollars would be an almost equatable reward for their participation.

    There is little difference between how Face Book treats its members and the share cropping schemes that were used to generate wealth for rich land owners on the backs of poor people and slaves. At least in the old share cropping schemes the works received a small portion of revenue, in the current situation members receive none of the revenue from the content that they create. Face Book and other sites that do not share the revenue and wealth that members create for them do not understand that the times have changed and the plantation game will no longer work. Now members have the ability to leave the plantation and to either create their own communities or to become members of communities that will pay them an equitable portion of the revenue and value that they create. This is one of the key revolutions of technology. There are no barriers to owning the means of production. Members are the means of productions, and are the value add. The pyramid that had members who are content creators and add value on the bottom has now been turned upside down. Unlike slaves that could not break free of the wealthy plantation owners bonds, members now have the ability to demand their equitable share and if they are not given it they can leave without retribution.

    It is time that members demand to be equitably rewarded (in the form of money) for the revenue and value that they generate.The 25 million Face Book members as a group should demanded to become stock holders and to be given a part of the revenue that they generate from advertisement clicks as well as a portion of the revenue that is generated from partnership deals based on their action and their numbers . If the members do make this demand and they are not rewarded in an equitable manner they should leave Face Book and any other site that will not reward equitably for the value and revenue that they generate.

    From Wikipedia

    “Sharecropping typically involves a relatively richer owner of the land and a poorer agricultural worker or farmer; although the reverse relationship, in which a poor landlord leases out to a rich tenant[2] also exists. The typical form of sharecropping is generally seen as exploitative, particularly with large holdings of land where there is evident disparity of wealth between the parties.[attribution needed] It can have more than a passing similarity to serfdom or indenture, and it has therefore been seen as an issue of land reform in contexts such as the Mexican Revolution. (Sharecropping is distinguished from serfdom in that sharecroppers have freedom in their private lives and, at least in theory, freedom to leave the land; and distinguished from indenture in sharecroppers[][]entitlement to a share of production and, at least in theory, freedom to delegate the work to others.) Sharecropping is often described as a never ending cycle of debt.

    Sharecropping agreements can however be made fairly,[attribution needed] as a form of tenant farming or sharefarming that has a variable rental payment, paid in arrears. There are three different types of contracts.

    1. Workers can rent plots of land from the owner for a certain sum and keep the whole crop.
    2. Workers work on the land and earn a fixed wage from the land owner but keep none of the crop.
    3. Workers can neither work for nor get paid from the land owner, so the worker and land owner each keep a share of the crop.

    There are three different types of tenant farming. According to A. Alkalimat, renters who were to hire land for a fixed rental to be paid either in cash or its equivalent in crop values; share tenants, who furnish their own farm equipment and work animals and obtain use of land by agreeing to pay a fixed percent of the cash crop which they raise; share-croppers who have to have furnished to them not only the land but also farm tools and animals, fertilizer, and often even their own food, which they had to pay back with a larger percentage than shared tenants. Tenant farming was a way in which to keep African Americans and other poor groups under control but make them feel like they had some importance. Though many blacks participated in tenant farming they still were looked at and labeled as the lower class.

    Because of the high rate of illiteracy among blacks at the time, they were often taken advantage of. Poor, illiterate and intimidated by post Civil War violence, many former slaves agreed to sharecropping contracts that were designed to keep them poor [PBS]. Eventually this exploitation led to violence. Courts would usually rule in favor of landowners when these incidents were brought to court.

  13. [...] Facebook Platform Could Be A Google-Like Market-Driven Growth Engine. Scott Karp with some great thoughts on the new Facebook Platform. Newspapers need to pay attention because this is your competition or collaborator, too, and perhaps in time in more profound ways than Google may be. [...]

  14. [...] Publishing 2.0 | Facebook Platform Could Be A Google-Like Market-Driven Growth Engine Smart perspective on Facebook’s move toward becoming a social media operating system. (tags: socialmedia web2.0 socialnetworking socialnetworks change business marketing technology) [...]

  15. [...] Facebook Platform is already having a huge impact on the crowded and competitive Web 2.0 start-uplandscape, most notably in the social music category, i.e. applications that allow users to share with others what songs they listen to and to discover new music by seeing what their friends and others in their network are listening to. The big winner so far has been iLike, which rocketed from 1,000 Facebook users on Friday to 180,000 yesterday (via VentureBeat). iLike has been so success that it’s now desperate hunting for more servers. In contrast, popular social music list Last.fm was nowhere to be found on Facebook Platform, and it fell to a Facebook user (Jeff Jarvis’ precociously talented son Jake) to fill the void. [...]

  16. [...] also a hugely, hugely powerful revenue platform: “Facebook Platform, which allows companies to build applications — and entire ad or [...]

  17. [...] pourrait devenir “le prochain Google” estime Scott Karp de Publishing 2.0. Je vous avais parlé d’hyperboles dans un billet précédent , [...]

  18. [...] i.e. redundant to the platform we already have called the Internet, has rung true for me, despite my initial enthusiasm. I finally figured out exactly why — Facebook Platform applications are appended, not [...]

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