Before going further, I’ll summarize why I think building a professional networking product or jobs product on top of Facebook is a big opportunity:

*Jobs, as a category, monetize really well – people are willing to pay to get to the right candidates
*Jobs, as a category, has supported multiple winners on the Internet (HotJobs, Indeed, SimplyHired, CareerBuilder, etc)
*LinkedIn is already a large, interesting, pre-IPO company with a clear value proposition
*Facebook is a daily use application for hundreds of millions of users; LinkedIn is not (although they’re trying to become more daily use with Twitter integration, questions, events, and other features)
*Many of the younger, up-and-comer folks spend more time on Facebook than they do on LinkedIn
*Competing with LinkedIn on the open Internet would be really hard; being on Facebook helps you address the customer acquisition problem.
*There is a growing segment of people want to use Facebook for professional purposes and FB as it stands today simply lacks the necessary functionality to do so.

Despite all of those good reasons to pursue jobs or professional networking on top of Facebook, I think there are some hard problems to solve. Having thought about this for awhile and ultimately decided not to pursue it, I’ll rank my concerns in order of decreasing importance – I think the “Facebook could do it” argument is the least compelling of all. Hat tip to my friend David King (@deekay) for helping me think through that last part earlier today.

Problem #1: Customer Acquisition – Cost and Difficulty
Once upon a time, it was fairly cheap and easy to acquire users on Facebook. There were tons of viral channels (requests, notifications, forced invitations, other forms of unsundry sneakiness, etc) – that era has passed. I would not say that virality on Facebook is dead, but it is much harder to have a fast-growing application that is not supported by advertising spend today than it was 6-12 months ago. And the applications that have seen rapid growth in the current environment tend to be entertainment and games applications. There are lots of people on Facebook who are looking to kill time and are willing to try new, fun things that their friends send their way or that they discover via the newsfeed, an ad, or some other mechanism.

Perhaps I should be a bit more granular and specific to jobs here. Let’s assume that the people who would be the targets of a professional social networking application do not “live” on Facebook (they don’t have it open all day long and are not constantly checking it). Ideally, you would not want to rely on those individuals changing their behavior and becoming more active Facebook users for your business to succeed. What’s the clever hack? You want to be able to communicate with them through other channels (email, in particular) where you can catch them when you have something to tell them. Meet them where they are, which is the email inbox. Given how buried most of the on-platform discovery options are (no more notifications, requests are buired), trying to rely on those mechanisms is unlikely to work. You can do wall posts and what not, but I don’t view that as a long term sustainable strategy.

So, in a world in which customer acquisition is difficult to achieve for free or at low cost, what’s the answer? Well, you can obviously spend money on advertising to acquire installs. So long as you know or believe that the cost of customer acquisition can be funded profitably by future revenue (or CPA < LTV), it could all work out. For example, if you are distributing jobs with $10,000 referral bonuses, you can build a sane business model along the following lines:

* Focus on jobs with referral bonuses greater than a few thousand dollars
* Split the referral bonus between the candidate and/or referring party and keep some margin for yourself
* Invest the margin you capture in customer acquisition to grow the network

For a job with a $5,000 referral bonus (not uncommon in tech), a service that kept 20% of the bonus would have $1,000 to contribute to customer acquisition and customer overhead. If the math works out, the only real risk you have is making sure you have enough money to invest in growing the network before you start to reap the benefits of the captured referrals.

Problem #2: Usage Model – It’s Not Games
By far, the most successful category for Facebook applications has to be games. Just look at the revenue numbers that companies such as Zynga (disclosure – I used to work at a company that Zynga acquired), Playdom, Playfish, Kabam, and others are able to generate. One of the nice things about games companies is that they are the perfect application for people who have lots of time to spend on Facebook. For games, the challenge is not getting people to engage – the challenge is getting your engaged users to monetize.

Let’s think about the kind of people who you’d want for a professional networking application focused on white collar jobs. You want people with strong educational backgrounds, with good past employment, and other indicia of employability. Those might not be people who are spending all day long on Facebook. A lot of busy people I know don’t “live” on Facebook the way many power gamers do. They check in periodically to see what’s up, respond to friend requests, check the occassional baby photo, and they’re gone.

How do you build an application usage model that engages them? Can you do it with a Facebook-only experience? I don’t know. But I do know that there are a lot of busy professional people who are not actively engaged with Facebook – making this service work for them is going to be a challenge.

There are actually two things to consider here. For those who are actively considering new jobs, they will usually go where the jobs are. If there’s a good job board or service on Facebook, they’ll use. But that only applies to active candidates. One of the magical things about a good professional network is that it helps route jobs THROUGH passive candidates (people who are not looking or are otherwise happy in their job(s)) to those who are open to new opportunities. For a service to really work, you need to have a way to engage these passive candidates as participants. Solving that latter problem is a big deal – it would make a service super useful as I’d estimate that there are 7-8 passive folks for every active job seeker.

Problem #3: Is This Core to Facebook?
I can’t answer this one. I don’t work at Facebook and never have. But I think of Facebook as being interested in two big ideas. One big idea is having the world’s best, most complete social graph of all facets of your life (personal and professional). The second is building the world’s largest personalized, contextual advertising business powered by a vast collection of data about you, your preferences, and your friends. On the one hand, having a third party build a professional networking layer on top of the existing social graph threatens the integrity of Facebook’s stranglehold on the social graph. But is that more important than making Places and Pages successful? More important than establishing Credits as a default payment mechanism on their platform? What about distributing Facebook Connect as the default ID / login system across the web? In short, Facebook can’t do everything. No company can. They have to pick the areas where they want to concentrate their firepower. Is jobs an professional networking in the sweet spot? I simply don’t know.

Hope you enjoyed the post. Feel free to leave comments below.

Does LinkedIn want to be a part of my daily life? Facebook clearly does – I’ve been on Facebook for what feels like a really long time. As a user, it seems to me that Facebook is very focused on being a part of your daily life – they want to give you a reason to come back to Facebook at least once a day. First it was simply connecting with your friends. Then it was photos and status updates. Now it’s the ability to import other things you’re doing across the web. They’re becoming an engagement vortex and it’s working.

LinkedIn doesn’t appear to have the same aspirations for the average LinkedIn user. Sure, if you’re a recruiter or job seeker, you have a reason to check in every day. I imagine recruiters would want to be on the service every day, looking for new people to fill openings and building their presence on the service. I also imagine job seekers use it regularly to get a sense for who’s hiring and what opportunities might exist for them. But for the general user who is not actively looking for a new job or trying to fill a position, there isn’t a strong reason / need to log in every day.

I don’t know if this is a problem. But it’s interesting to me that status updates are a virtuous / vicious cycle (depending on how you look at it). I believe people publish status updates to let the world know what they’re doing and to hopefully generate a response of some sort. However, if you publish your status update in a place where others won’t see it, you don’t get the feedback. So, if you have daily engagement, status updates are a natural thing to offer users – it’s a cheap way to inject more content and dynamism into the system and it gives people more things to discuss. On the flip side, I don’t think you can offer status updates as a means to drive dynamism – people will update their status where others are.

Why isn’t the LinkedIn activity feed filtered or curated?? I had high hopes for the RSS feed that LinkedIn offers. It’s a passive way to find out about what people are doing without visiting the site. However, the current RSS feed is an unfiltered data dump – I get just about every new connection (person X is now connected to person Y) along with job changes, promotions, etc. Getting all of the connection notifications is really noisy – I’d rather not get all of those. One thing I’ve learned from using Facebook, though, is that there is tremendous value in filtering the feed. LinkedIn could do that. I am VERY interested in hearing about my friends who change jobs, get promoted, become advisors at other companies, or otherwise have noteworthy developments to share. Right now I feel like that’s lost in the noise – it feels to me that there’s an opportunity to streamline that feed (whether it’s delivered via RSS, email, or whatever) to make it more of a highlight real than a firehose delivery of activity within my network.

Why isn’t the “Events” feature more vibrant? I’m actively involved in organizing events. A lot of the people who attend the events I organize are on LinkedIn and the audience from which I draw is largely business people. For the life of me, I can’t figure out why the “Events” feature in LinkedIn feels less vibrant. For example, marketing events on Facebook, even business events, is actually pretty effective when done correctly. You can get a good amount of uptake and response and finding new potential attendees is fairly inexpensive and easy. With all of those business people on LinkedIn and the importance of face-to-face networking to build business relationships, I would have expected LinkedIn to be more of a force in promoting events and helping event organizers find and reach potential attendees.

Is the LinkedIn API the best way to get more engagement with the underlying data stored in LinkedIn? When I saw the blog post about the LinkedIn API becoming more open, it immediately struck me as a good idea. Instead of finding more ways to get people to visit the core site, why not make the vast store of data and information they have available accessible to other applications and services that businesspeople do use every day. It certainly reinforces the value of the data stored in LinkedIn and might enable developers to create some new applications that sit on top of the data and do cool things with it. I have high hopes for their new developer program and what it could mean for business applications. Having all of those applications live within in LinkedIn is probably less interesting than taking that data to places where it isn’t accessible today.

What do you think? How do you use LinkedIn? How would you like to use it? Comments are welcome below.

Overall, I do agree that email inboxes do contain a lot of interesting data about people and how frequently they communicate over email and potentially IM if a vendor offers both products in an integrated fashion. That being said, I don’t see how any of the top web email providers (Microsoft, Yahoo, and Google) can use this email information to build new social networking products. There is, however, an opportunity to use that data to power other people’s applications.

What additional value would I get in using one of these systems over Facebook, MySpace, or my current social network of choice? Details on these products are sketchy at best. However, almost any social networking product worth its salt has a contact importer. Once a user imports his/her contacts, he or she can then determine who from that subset of people he/she would like to invite. Is having a machine prompt to do this for personal social networking of great value? I can see the utility of this auto-population or auto-discovery in a work context (Xobni does do a good job of showing me my own correspondence patterns and I can imagine many things you could build on top of that data – the work use case is different as I think work communication patterns tend to be more dynamic than personal ones). Nothing I’ve heard in the limited details that have come out gives me reason to think that they’re on to something bigger.

I’d also say that if “powering up” this network requires me to create a new profile page, it’s a non-started. I’m out of that business for now unless or until I see a really great application that’s worth the time.

Webmail inboxes are a mess – I have yet to use an email product that has an even decent address book. All of the email address book offerings from the Big 3 email providers feel really dated. For example, the Gmail address book does not do a very good job of de-duplicating contacts. I have folks in my address book who have multiple entries and I’m not interested in going through to manually de-duplicate them; I’m counting on a machine to do that for me.

The larger point here is that I don’t know how you can build a really good, effective social networking product on top of email if you don’t do something to put some good, quality structure around the data. Social networking services who are sucking up email addresses to match a user’s inbox with their database of contacts don’t have the same problem – you just throw away the ones that don’t match (or allow a user to invite them). It’s a very different situation if you want to build a whole new social network product with email as the foundation.

Cross-functional collaboration is not easy inside of large companies – This is a fairly obvious point, but big companies are notorious for having internal challenges when it comes to cross-product collaboration. When one of the products in question is email, I don’t imagine that will be an easy conversation – nobody wants to play around with an interface that touches tens or hundreds of millions worldwide.

Think about the refresh cycles for webmail systems. How often do Gmail, Yahoo Mail, or Hotmal get updated? Not that often, and I have to think that touching those interfaces requires a lot of signoff and a strong conviction that the proposed changes will positively impact a wide number of people. Otherwise, you might end up with angry users. I have a hard time seeing any of these companies acting aggressively with one of their web crown jewels.

The end game ought to be to make this information available to other services and make mail the data platform, not build new applications. Sadly, I don’t think that’s a very interesting business to be in – I don’t know how you re-establish yourself as a major player in social networking by simply providing the data layer that powers other applications.

At the end of the day, developers care about increasing the audience for their applications and/or making more money. At the end of the day, end-users (also known as normal people) care about a great user experience and a compelling services.

With these goals in mind, here are a few thoughts about the open social movement:
1. OpenSocial is a set of APIs, not an actual product – Despite all of the speculation about what it will be, I think the press releases are pretty clear about what it won’t be. What’s being contemplated is a set of APIs that will make integration social data easier and allow developers to pull from a wider variety of sources. It’s not actually a product or service in and of itself. The onus will still be on the community to build cool stuff that makes use of the platform. And the underlying data has to actually be useful – this alliance has to have profile data about people and entities that are actually interesting to developers.

2. Open systems tend to work best when competing against truly closed products. There are a lot of posts on the web that keep citing the “fall” of AOL and the triumph over the web. Two quick things I think bear mentioning. If being valued at $20 billion recently is a “fall” then I bet a lot of companies would be happy to fall. AOL is no longer the force it used to be, but it hasn’t exactly disappeared. A better example is the case of open source software in the enterprise. In the case of OSS, the vendors were so intent on maintaining control that there was a real market opportunity for more open entrants. Facebook is not completely open, but it’s certainly more open than MySpace. It will be interesting to see if an extremely open system can beat an open system.

3. Having open APIs does not remove the need to build really great products. Openness is a product decision. Being more open than your competitors does not guarantee success. It doesn’t guarantee adoption. I do think, though, that it gives you more flexibility to be clever about how you integrate with others. Simply opening up does not remove the requirement to build products that take advantage of that openness to build better products and services.

One of the undertones in a lot of the blog posts I’ve read is that new upstarts on the Facebook platform haven’t been able to break through to dislodge RockYou or Slide. Naturally, finding a new pasture in which to compete where you can be one of the first-mover launch applications is appealing. But at the end of the day, this open coalition has to deliver on its promises to developers (openness = more opportunity to acquire users or make money) and end-users (openness = better user experiences and more compelling applications) or it won’t work.

I think it will be really interesting to see how this all pans out. We’re clearly in the early days of this.

Before I get too far into my limited comments, I should point out that I have friends who work at Spock and think they’re doing some really interesting stuff. Now that I have my disclaimer out of the way, just a few observations.

Observation #1: This has to be the first step in making Facebook profile information more public – otherwise it’s really boring. Unlike the launch of the NewsFeed, which was met with some temporary backlash from users given the level of information it exposed, Facebook seems to be taking a much more conservative approach in rolling this feature out. Over time I expect them to allow users to expose more of this information over time – you can already place a Facebook badge on your blog or personal website. Over time I can see them expanding this functionality to allow users to include the networks to which they belong, groups to which they belong, and other things of general interest to their public profiles.

Observation #2: Aside from boosting page views for Facebook (and I don’t think they really need the bump), the bigger issue is that public profiles do two important things. One, they can be indexed and hence the content appears in search results. More interesting, however, is that public profiles (especially if they have static URLs which can be shared) allow users to have a public profile or summary of themselves to which they can point people who are looking for them on the web. This is one of the nice things about LinkedIn public profiles – it’s a handy thing to include in a sig or on a blog for people who want to find out who you are without combing through Google search results pages and trying to assemble the picture themselves.

The real driver here is that public indexing makes it easier to find and add people as friends in Facebook while you’re using your favorite search engine. Done properly, this could be a pretty attractive, low-cost registered user acquisition vehicle for Facebook. I bet Facebook spends a lot more time worrying about how to boost registered/active users than it does trying to boost pageviews. This feels to me to be driven by user acquisition opportunities, not a pageview bump.

At the end of the day, what’s emerging is a battle between machine-created (people who will index the information about you and present it in a summarized fashion) and user-created profiles. And like most battles, it’s not clear that the outcome will be a binary outcome in which one dominates. For people who want to make more information about themselves public, Facebook is going to give them more tools. For those who prefer to let the web do the work, they’ll have tools that allow that to happen as well. This will be interesting to watch.

Another question I have is whether the value for a machine-generated and user-created public profile is materially different. I haven’t quite figured that one out yet but would love any comments or thoughts.

I have been doing a lot of thinking about vertical search engines lately, especially because I find them to be very useful in getting information in categories where general search doesn’t always give me the right answer right away. As useful as vertical search engines can be, I often wonder whether any of these vertical search engines are garnering enough traffic to be viable standalone properties.

Why does this question matter? Well, from my point of view it looks like vertical search sites who can’t generate enough organic traffic of their own through SEO, other techniques that will drive higher organic search results in Google or Yahoo, or having a great destination site that brings users directly to the front door will be destined to be in the “powered by” category offering white label syndicated solutions to partners. I don’t want to denegrate the “powered by” model — it has made a ton of money for Google and its partners and is an effective way to distribute great technology. However, given the amount of venture capital invested in this sector, my hunch is that investors are looking for ways to build meaningful, standalone companies who can be destinations of their own given that very few vertical search engines have been acquired in the web 2.0 world (I am excluding all of the web 1.0 comparison shopping and job sites that got acquired).

In order to answer this question of whether vertical search sites are stalling out in their eventual aim to become destination sites of their own, I took a look at some Alexa data on some of the most prominent vertical search sites. Yes, I realize that Alexa data is imperfect, skewed, etc. That being said, it’s publicly available and easy to access. I took a look at the Alexa ranking for as many vertical search sites as I could think of and took note of their current Alexa ranking. The next step was to then bucket them into categories (top 500, top 1000, and top 10000). The results of this mini-exercise can be seen below.

If you don’t want to scroll down, here’s the punchline — only two “web 2.0″ vertical search properties cracked the Alexa Top 1,000. Yes 1,000 is an arbitrary number to choose. Yes Alexa data is iffy. But with all of those things in mind, we are only talking about 2 companies (of the 12 I found in the top 1,000) who made that cutoff.

Looking at this data tells me two really important things. First, it is really hard to build a vertical search engine that gets significant amounts of traffic. Looking at the clustering of sites that managed to crack the top 10,000 shows a serious weighting toward sites where the underlying topic of interest (travel, product comparison, jobs and recruiting) is a market where significant amounts of money change hands.

The other major thing I take away from this data is that more and more vertical search engines ought to be looking to “power” the search of other folks unless they have some really clever ways to generate organic traffic — it’s really hard to become a highly ranked vertical search property.

Feel free to leave me a comment or point me toward any search property I might have missed.

Raw Data Appendix Below (Global Alexa Rank as of March 19, 2007)

In the Alexa Top 500

IMDB (#35)
LinkedIn (#178)
Technorati (#215)
Monster.com (#327)
Careerbuilder.com (#375)
Shopping.com (#440)
Nextag (#471)
TripAdvisor (#494)

In the Alexa Top 1,000

Expedia (#400)
Travelocity (#574)
Orbitz (#597)
Citysearch (#734)

In the Alexa Top 10,000

Shopzilla (#1,403)
Zillow (#1,542)
Kayak.com (#1,561)
Yelp (#1,738)
ZoomInfo (#2,364)
Indeed.com (#2,386)
Trulia.com (#4,995)
Oodle (#8,056)
Blinkx (#8,250)
Become.com (#8,335)
SimplyHired (#9,054)