Facebook – The Next Commoditizer in the Making

Every now and then I grab on to a piece of data that takes a long time to digest. Awhile back I read a survey about how roughly 90% of search traffic originates from the main 4 search engines. Given that reality, there are 3 ways to cope:
1. Do a great job of optimizing your content so that it is easy to find via search (SEO/SEM)
2. Find a way to get cost-effective advertising through search
3. Eschew search altogether and grow your business some other way

By and large, most companies in the consumer Internet space aspire to do the third option, be it through viral marketing or some other technique, but few have actually managed to pull it off. The thing that continues to strike me about Facebook, and why I think a lot of people continue to underestimate the potential for what they’re doing, is that they are building a platform that doesn’t rely on search for user acquisition or for discovery. It wasn’t until fairly recently (as in the last few months) that I really started to appreciate what it means to be in a position where your ability to grow is not constrained by the very factor that constrains almost everyone else in your peer group.

When you get to the point where you are the destination and the interface where users start their Internet experience, without relying on someone else to deliver them to your front door, you are in a uniquely interesting situation. It gives you a chance to be the new platform and that’s a really powerful position to occupy.

If you are the platform, the natural next step (in the web world at least) is to start commoditizing stuff. When I say commoditizing stuff, I mean offering your own users services and products that 3rd parties have traditionally offered and using your distribution, reach, and position to make life more difficult for independent 3rd parties. MySpace has already done this and looks like they are going to get even more aggressive in doing so. Facebook hasn’t done it yet, but I think they are on the verge of becoming the next great commoditizer. Here are two products that I see where Facebook is already commoditizing existing or nascent offerings:

Microblogging – Facebook status updates are (for me at least) a better version of Twitter with the added advantage that I don’t have to seed an entirely new network to get started. Facebook status updates are a great way to update friends on what’s going on and keep track of what folks are doing. And they work nicely on mobile, too — I expect Facebook to step on the gas pedal here and take this space.

Photo sharing – An increasingly large percentage of the photos that I see are shared via Facebook. I still do get some share on Flickr and a few other services, but the Faceboook photo sharing service seems to be encroaching on the existing photo sharing network.

Services waiting to be commoditized:

Classifieds – Per an earlier post, I think it makes a lot of sense for Facebook to look to commoditize the classifieds space and become the place where their users go to buy, sell, and trade stuff. If you aren’t Craigslist and you’re in the classifieds space, I think you ought to be concerned about this development.

Event Planning (Evite, Socializr) -One of the things that I’ve been thinking about is what it would take to dethrone Evite as the king of online invitations. Well, if Facebook continues to be the place where your friends already are, why use a different service to invite people or organize an event? It’s not so much about new features and functionality as it is making it really easy to invite folks in the context of where they are already.

Search – Yes, I think there is some possibility that search could (in the longer run) get commoditized by Facebook. If you are the starting point and central interface for many users, you certainly ought to have some ability to steer people toward a particular search provider. For example, if Facebook is the place where people start their web experience, I have to believe that there are some users who decide to use whatever search engine Facebook provides as opposed to going to their favorite search engine. As Facebook grows, the share of users who might just use whichever search engine or search technology Facebook provides could become meaningful. For someone like Facebook, search technology is an input — as long as it’s good, there’s an argument to be made that the chosen provider would have more to do with economics than technical superiority.

Social News – Facebook already has the ability to share content from the web into Facebook. Digg is the leading social news site today, but who’s to say that Facebook couldn’t deliver similar capabilities? They have many more users, the ability to share content into the Facebook environment, and presumably some way to tell what news items are being shared most often. I can easily imagine a “Most Popular News on Facebook” service that keeps track of what news stories are most popular in any given network or across the whole user base.

These kinds of evolutions happen slowly. The emergence of the Internet allowed companies like Google to break free of the need to go through the Microsoft Office + OS hegemony and build real businesses without reliance on the dominant user acquisition model of the day (desktop software). I’m beginning to believe that we’re seeing the early stages of a similar transition from a world where the web is about utility (search, email, getting stuff done) and more about fun and connections. Not a new thought by any stretch, but the implications for it are worth thinking about.

  • You’re basically saying that Facebook is going to become a portal. The first generation portals built their traffic on the basis of communications (webmail) being the “milk at the back of the store” – the thing that brought you back repeatedly to their website. They make pageviews (= money) by diverting you with bright shiny objects while you head to the milk – whether it be “top 10 ways to lose weight” or “Britney does something inane again” headlines, or the latest travel deals.

    This go around, the mechanics are the same but the details have changed. Its the wall and private messaging (and photo sharing) that are the communications mechanisms that bring you back repeatedly, and you’ve laid out a bunch of suggestions for additional products, programming and services that will divert you as you head back to pick up the milk.

    It speaks to the power of the default if you can become a users homepage

  • jeremy liew

    You’re basically saying that Facebook is going to become a portal. The first generation portals built their traffic on the basis of communications (webmail) being the “milk at the back of the store” – the thing that brought you back repeatedly to their website. They make pageviews (= money) by diverting you with bright shiny objects while you head to the milk – whether it be “top 10 ways to lose weight” or “Britney does something inane again” headlines, or the latest travel deals. This go around, the mechanics are the same but the details have changed. Its the wall and private messaging (and photo sharing) that are the communications mechanisms that bring you back repeatedly, and you’ve laid out a bunch of suggestions for additional products, programming and services that will divert you as you head back to pick up the milk. It speaks to the power of the default if you can become a users homepage

  • Interesting thought about the classifieds, but the strongest part of Craigslist is also one of its most maddening – it is local “only”. I have done some research demographic report development, and as part of that I did some GIS mapping of those local sites. Very interesting how they are organically covering the US into the major urban areas, but also smaller ones. You can see this effect on my website’s google map of the 289 US CL websites (http://www.aMillionPlaces.com). My point is that face book and others miss out on that local aspect, which is something that obviously people love. They could just post to some national classified boards, but they insist on the concentrated markets that CL provides, only because CL enforces a philosophical-based rule set. There is just something about that I don’t think most of the others can emulate very well.

  • Jamie

    Interesting thought about the classifieds, but the strongest part of Craigslist is also one of its most maddening – it is local “only”. I have done some research demographic report development, and as part of that I did some GIS mapping of those local sites. Very interesting how they are organically covering the US into the major urban areas, but also smaller ones. You can see this effect on my website’s google map of the 289 US CL websites (http://www.aMillionPlaces.com). My point is that face book and others miss out on that local aspect, which is something that obviously people love. They could just post to some national classified boards, but they insist on the concentrated markets that CL provides, only because CL enforces a philosophical-based rule set. There is just something about that I don’t think most of the others can emulate very well.

  • charles

    Jeremy,

    I agree with you that things have come full circle. However, a lot of the “old” portals (Yahoo!, Excite) sent people off to a lot of external destinations in the beginning and built other stickiness features of their own over time. Facebook’s strategy reminds me a lot more of the old AOL playbook – don’t focus on being a router or switchboard, focus on being the destination site and keep users inside your environmentas opposed to being a jumping off point for a wider web experience.

  • charles

    Jeremy, I agree with you that things have come full circle. However, a lot of the “old” portals (Yahoo!, Excite) sent people off to a lot of external destinations in the beginning and built other stickiness features of their own over time. Facebook’s strategy reminds me a lot more of the old AOL playbook – don’t focus on being a router or switchboard, focus on being the destination site and keep users inside your environmentas opposed to being a jumping off point for a wider web experience.

  • charles

    Jamie,

    Thanks for the great comment. I checked out your CL website map – very impressive stuff.

  • charles

    Jamie, Thanks for the great comment. I checked out your CL website map – very impressive stuff.

  • Charles — Reading this in 2010 is very instructive. nnI think its pretty clear that for an increasing number of businesses, Facebook is the new SEO.nnAs I look at the spate of recent social commerce companies as an example, they’re all predicated on the idea that mastering social as the customer acquisition channel is the key to unbounded growth (vs growth of Gen 1 players a la Amazon, Ebay where growth was constrained by the limits of mastering search Google / Yahoo as a channel)nnAt the end of the day what makes any platform the lifeblood of an ecosystem is its ability to enable others to make a living on it. When you have 550M people logging in every day, you are certain to be disruptive force to many industries. We’ve already seen it in Gaming, but I’ve always believed you’re going to see a ‘Social’ suffix attached to most every category that matters on the web (Dating, Commerce, Search, Finance etc etc) and the creation of new winners in each that ride this disruption.

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