If Facebook Wants to Own the Global Like, They Need to Own Bit.ly

Earlier this week I got my bit.ly pro account activated – I’m now sharing links at chudson.me. The nice thing about bit.ly pro is that it really reveals a lot about how powerful bit.ly really is as a service. After playing with the pro version of bit.ly, I’m really convinced that they’re on the verge of something big and anyone who wants to own and understand the “global like” (an Internet-wide understanding of what content is being shared most often and by whom) needs to ultimately own this company or whichever company becomes the de facto URL shortening service.

Let’s be clear – URL shortening is a commodity service. But so is free email. Once upon a time, search was a commodity service as well. I continue to believe that you can build a big business in a commodity service if you are the winner and there are network effects to your business. I do believe that bit.ly has network effects – being the de facto URL shortening service of choice for more people means a) you’re seeing more shared content and should be able to get a better sense of sharing patterns among a larger audience of people and b) if enough people see a given URL shortening service being used by their friends, they’re likely to adopt that service. The other way to engineer around the need for network effects is to just get baked into other products via distribution deals (which they have already done).

I’ll go one step further – if bit.ly ultimately becomes the de facto URL shortening service for the Internet, that’s far more valuable to Facebook than it is to Twitter. I’ll explain why below. First, let me assert the difference between the trajectories for Twitter and Facebook:

Twitter is heading toward becoming a broadcast medium where people go to distribute and discover content. Sharing and commenting are important signals to what’s interesting, but that’s secondary to the primary function of content distribution.

Facebook is becoming more than a social network – it’s trying to own your implicit and explicit interests and preferences and presumably reuse those to deliver more targeted advertising both on Facebook and across the wider Internet. Understanding what you like, share, and consume is critical to understanding who you are and what type of advertising you should be shown.

After playing with bit.ly pro, I’m really impressed by what bit.ly could ultimately become. Being the top URL shortening service on the Internet gives you a window into three really important (and hard to ascertain) things on the Internet:

*Top Creators – Who is producing or discovering content that is being shared widely?
*Top Distributors – Who is responsible for distributing content? Who are the nodes who have large audiences? Who are the top curators?
*Relevance – What content do I, as a user, want to consume? What resonates with me?

You know what that sounds like? It sounds to me a lot like the core search problem that Google solved. I’m surprised when I look at what it could mean if bit.ly solves this problem as the de facto link shortening service for the web. They will have a ton of data about the production, distribution, and consumption of information across the web. They’ll have it both in real-time and on a historical basis. That’s a big deal. And it’s a private corpus that they alone own. Do you think it’s interesting to own what content is shared, by whom, how often, and to whom it’s interesting? I sure think so.

Bit.ly pro is super important to the company’s strategy as it gives them relationships with some of the top content creators – the vanity URLs they give and the associated metrics allow top content creators to understand how their content is being distributed. While that data is interesting to the publishers, it’s extremely valuable to bit.ly as well.

Having a distribution deal with Twitter also gives them a lot of information about how information is shared on Twitter as well. So what would happen if Twitter swapped them out for another URL shortener? Well, unless Twitter banned bit.ly from 3rd party clients, all bit.ly would lose is all of the automated shortening that comes from Twitter. They wouldn’t lose “power users” who use bit.ly and want the analytics and data on what’s shared.

Thoughts? Leave me a comment!

  • You hit it on the nail…well said. Bit.ly has HUGE potential, I just wish the product was more polished from a dashboard, data and analytics perspective.

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  • Yann Ngongang

    Interesting post, but a couple of arguments need revisiting: 1- that bit.ly has network effects; 2- that data about internet consumption has such huge power. I think both arguments are not correct.

    Network effects are created when the user's value has a direct relationship with the size of the user base (or its square actually). In the case of a link shortening service, I can be the sole user of a service and still get full utility. What you seem to imply is that bit.ly gets brand leverage, in the same way that seeing cool people with an iPhone makes me wanna run and buy one. But it's no network effect.

    Secondly, the argument about understanding the web assumes that such insight provide leverage in attracting ad dollars. If that were the case, then the largest providers of free email (Goog, Msft, Yhoo), all companies with strong advertising platforms, would have harvested tremendous dollars from such insights. But they have not! Gmail is profitable but only because architected cheaply compared to Hotmail and Yahoo mail. And these guys have thrown all the compute & AI power to all the rich data of email (and shares).

    In my opinion, maximizing ad revenues is more about catching a user's buying cycle then understanding her universe of knowledge interest and shares. This would mean that facebook's vision of upsetting the ad world is doomed, yes. Henry Blodget had a very good argument on Silicon Alley insider.

    There may be an advantage to bit.ly being 1st to market with the largest audience, but it may have to be some other business mechanism…Not just data mining of link maps.

    Y

  • Okay, I agree that I didn't properly use network effects in the true sense of the word in this post. There are not increasing returns to incremental users being added to bit.ly's service. That being said, I do think that they stand a good shot at being the de facto URL shortening service of choice – consumers and publishers alike will use what NYT, GigaOm, TechCrunch, and others use under the theory that if it's good enough for them it's probably good enough for the average user.

    As for the advertising piece, I disagree with you there. Gmail doesn't monetize well because most communication services monetize poorly from ads – you're there to send emails, not view ads. I think Facebook wants to be the world's biggest, deepest behavioral ad network on the Internet. Will the behavioral ads they show rival the revenue opportunity around capturing a user who's looking for a mortgage? No. Is there a ton of remnant and other non-targeted ad inventory out there where I think Facebook can make a huge dent, especially if they don't have any real regard for user privacy and fusing what they know from your behavior both on the site and across the web based on things you share and consume? I think so. Facebook's more likely to unseat AdSense than it is to unseat AdWords. Given that AdSense is an enormous chunk of Google's revenue, that's a pretty juicy target to attack.

  • Yann Ngongang

    Interesting post, but a couple of arguments need revisiting: 1- that bit.ly has network effects; 2- that data about internet consumption has such huge power. I think both arguments are not correct.nnNetwork effects are created when the user’s value has a direct relationship with the size of the user base (or its square actually). In the case of a link shortening service, I can be the sole user of a service and still get full utility. What you seem to imply is that bit.ly gets brand leverage, in the same way that seeing cool people with an iPhone makes me wanna run and buy one. But it’s no network effect.nnSecondly, the argument about understanding the web assumes that such insight provide leverage in attracting ad dollars. If that were the case, then the largest providers of free email (Goog, Msft, Yhoo), all companies with strong advertising platforms, would have harvested tremendous dollars from such insights. But they have not! Gmail is profitable but only because architected cheaply compared to Hotmail and Yahoo mail. And these guys have thrown all the compute & AI power to all the rich data of email (and shares).nnIn my opinion, maximizing ad revenues is more about catching a user’s buying cycle then understanding her universe of knowledge interest and shares. This would mean that facebook’s vision of upsetting the ad world is doomed, yes. Henry Blodget had a very good argument on Silicon Alley insider.nnThere may be an advantage to bit.ly being 1st to market with the largest audience, but it may have to be some other business mechanism…Not just data mining of link maps.nnY

  • Okay, I agree that I didn’t properly use network effects in the true sense of the word in this post. There are not increasing returns to incremental users being added to bit.ly’s service. That being said, I do think that they stand a good shot at being the de facto URL shortening service of choice – consumers and publishers alike will use what NYT, GigaOm, TechCrunch, and others use under the theory that if it’s good enough for them it’s probably good enough for the average user. nnAs for the advertising piece, I disagree with you there. Gmail doesn’t monetize well because most communication services monetize poorly from ads – you’re there to send emails, not view ads. I think Facebook wants to be the world’s biggest, deepest behavioral ad network on the Internet. Will the behavioral ads they show rival the revenue opportunity around capturing a user who’s looking for a mortgage? No. Is there a ton of remnant and other non-targeted ad inventory out there where I think Facebook can make a huge dent, especially if they don’t have any real regard for user privacy and fusing what they know from your behavior both on the site and across the web based on things you share and consume? I think so. Facebook’s more likely to unseat AdSense than it is to unseat AdWords. Given that AdSense is an enormous chunk of Google’s revenue, that’s a pretty juicy target to attack.

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