I believe that Facebook remains a significant threat to not only
Google, but most of the other players in cyberspace as well. In fact, right
now, Facebook is *the* significant threat. If I were in charge of Google I
would be working furiously to contain this threat while there is still some
chance. We may be past that point already. In the absence of any real competition
and barring any serious misstep on their part, Facebook will swallow its
competition on all sides.
There will be one dominant
player in cyberspace and it will be a social network. Right now, Facebook is
the one to beat. It reached critical mass at least around the 500 MAU mark or
so. This is an inevitable outcome of the mathematics of 'Group Forming
Networks'. The compounded force of the interlocking networks makes Facebook
extraordinarily sticky. In fact, mathematically, the acceleration toward the
center of such a network exceeds that of gravity.
For Facebook, the battle has
been all but won and it is now in the endgame.
Amongst other things, Facebook
has:
- relationships with billions
of people
- data on most of the active
users in cyberspace
- a captive audience
- much more of the world's
end-user data (photos, etc) than anyone else
- an extremely 'sticky' and
interconnected network
- active support for 'group
forming networks' (GFNs)
- the largest (by far) network
of GFNs
- committed users
- very deep data on their users
The above assets are near
impossible for another company to duplicate and as long as they are not
disrupted somehow, Facebook will continue to accrete 'social mass' and increase
its network 'density'. The ease of disruption is inversely proportional to the
nth power of the number (n) of people in the network. At over 2 billion people,
that value (1/(2^n) has become very, very small. It is so small that a network
attempting to compete 'apples to apples' has virtually no chance of succeeding.
To disrupt this network now will require seriously novel thinking.
As a particular example, the
way to monetize page-views (and hence search, blogging, tweets, online content,
etc) is through advertising. Google must cast a wide advertising net to
facilitate a sale. Advertising on Facebook can be targeted much more
effectively. Ultimately, the source of funding for advertising comes from
sales. As long as a dollar in advertising results in more than a dollar in net
revenue for the advertiser, the dollars will flow. Google cannot guarantee that
your advertising dollars will create net profits. Because Facebook knows much
better who will buy, when and why, they can already offer a much greater bang
for the buck. Within a few years (probably sooner), they will likely be able to
demonstrate that their advertising services increase net revenue -- the net
profit associated with the advertising will exceed the cost of advertising,
making advertising on Facebook a necessity.
Google still has search, so
they will still have eyeballs. However, as more of cyberspace falls into Facebook,
Google can provide search for less and less of the internet. Search is only
going to draw people who are looking for something. If they already know where
it is (on Facebook), they will not visit Google. This is especially true as
more relevant content moves into Facebook and effectively out of the reach of
Google.
Google has a lot of data on who
searches for what, when and likely why. They also have a lot of data on volumes
of search requests. No doubt they have some methods of determining how much of
their audience is being captured and held by Facebook. The fact that Google,
the company with the most intelligence on cyberspace prior to Facebook is
worried means they must have seen something that worries them.
Any company that is threatened
by Facebook (and I think that is most of the players in cyberspace) needs to
first of all understand *why* Facebook presents such an extraordinary threat. It
is not clear to me that even the people at Facebook realize why they have grown
so spectacularly.
The best hope that competitors
have is that Facebook stumbles badly and creates pressure for their user base
to move. Failing either a dramatic challenge from a huge player like Google,
Amazon, Microsoft, Oracle, HP, IBM, etc, government interference or a
spectacular stumble by Facebook, the game has already gone to Facebook.
Excepting government
interference, I think that Google, Microsoft and Apple have the best chance to
disrupt Facebook. However, their window is rapidly closing. People and entities
like companies, charities, clubs, etc. that already have data, a comfortable
presence and network linkages on Facebook have no incentive to move away from Facebook.
They need to be enticed away by something more compelling. As their presence on
Facebook grows and is increasingly bound by linkages into the Facebook
ecosystem, the ability to move them diminishes rapidly.
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