Saturday, 15 August 2009

FACEBOOK IS DEVELOPING ITS BUSINESS MODEL BUT STILL HASN'T MONETISED THE SOCIAL GRAPH

Last year in an interview with FAZ Mark Zuckerberg of Facebook was asked: "The web 2.0 architecture is not necessarily a revenue opportunity. This is not where the money is", said Eric Schmidt from Google. Do you agree with him?

Zuckerberg said:
"What every great Internet company has done is to figure out a way to make money that has to match to what they are doing on the site. I don't think social networks can be monetized in the same way that search did. But on both sites people find information valuable. I'm pretty sure that we will find an analogous business model. But we are experimenting already. One group is very focused on targeting; another part is focused on social recommendation from your friends. In three years from now we have to figure out what the optimum model is. But that is not our primary focus today"
I suspect the relaxed "it's not our focus today" hides a growing fear from the increasing threat from Twitter, and the even bigger threat from Google. The interview was this time last year, and I have met with Facebook several times in recent months and think they are getting interesting again inspite of the confusing redesign. First Facebook Connect, and now its acquisition of Friendfeed. They are building systems for advertisers, new product features, and an infrastructure for servicing clients and agencies. All good stuff, they are generally tightening up their game.

Of the two areas that Zuckerberg highlighted: social recommendations and targeting, the more interesting is social recommendations. That was the original promise of the social graph. A term he popularised, and a term I used for my blog. It pointed at something mathematical, anthropological, and fresh.

The term social graph and its sister social networking, still often get used interchangeably and mistakenly. The best explanation of this came from Robert Scoble, several years ago when he said:
"The Social Graph is NOT my social network.

My Social Network is my friends list. But the Social Graph shows a LOT more than that. For instance, did you know you can see everyone who is into skiing on Facebook? Did you know you can see everyone who is into Daft Punk? Those people are NOT in my social network. But they are part of the social graph that you can study on Facebook. Interesting how we have disagreements about language.
So, what would you call what you can see in Facebook? It isn’t just my social network, though. Try again."
Facebook knows us. It knows what we like. It knows who we like. It should now be developing powerful algorithms that help us visualise and identify new services, products, experiences, and opportunities. At worse it should use Amazon like collaborative filtering technology to make recommendations, but at best should be inventing new ways for us to shop and discover. Its probably harder than it seems, as Facebook has hired some of the leading brains from graph theory and network science.

Perhaps Eric Schmidt, of Google, was right when he said "The web 2.0 architecture is not necessarily a revenue opportunity. This is not where the money is".

I hope not.

But only time will tell.


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