Simple thoughts on Facebook’s complex plan

One of the biggest stories in social media this week is Facebook’s plan to make their social graph platform ubiquitous. A few things to keep in mind: network effects, natural monopolies, and costs…

One of the biggest stories in social media this week is Facebook’s plan to expand its platform availability and allow users to link disparate online activities into a single social graph. I see this as a case of “aggregate or be aggregated” – and the biggest question mark is how Google will respond.

There’s some great writing out there already on Facebook’s plan: Robert Scoble describes Facebook’s ambition. Jeremiah Owyang calls it a Crusade of Colonization. Shiv Singh sees it as Social Glue.

Some of my quick thoughts:

  • Network effects aren’t unlimited. Facebook operates the universe’s largest social network. We all know about the benefits of network effects – but unlike a theoretical hockey-stick graph, past a certain point network effects diminish. You don’t have to search too hard for people who’ve gone through a “friend/follower purge” to reduce network noise. Bigger networks aren’t always better from a user perspective.
  • Natural monopolies have huge barriers to entry. Scoble uses a railroad analogy; earlier this week, Shawn Morton told me a story about a speaker who equated social media with the nuclear power industry. While Facebook’s investment in technical and human resources is substantial, it’s not exactly a natural monopoly on the scale of a railroad, electric utility, or airline. And the nature of social technologies tend to disrupt institutions; don’t be surprised if a new entrant – comprised of staff who’ve departed Facebook – undercuts Ubiquitous Liking.
  • This isn’t free. Keep in mind that participating in this effort isn’t free for anyone. Individuals gain recommendations from friends, so far on things like hockey players and jorts. The cost is a bit of privacy. Brands stand to gain referral traffic. The costs include sharing customer data. Whether individuals and brands decide to “pay” those latent costs, vis-a-vis personal experience or online business goals, will determine Facebook’s success or not.

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