Jun 22 2007

The Facebook Problem

I’ve had an account on Facebook for a while. Until a month ago – around the time of the F8 Platform launch – I checked it once a month.

In the last 30 days, I’ve been checking it once a day.  My friends list has exploded, I’ve added a bunch of apps (just to play around – hint – important reference to a note below), and exercised most of the features that I could find.  VCs and entrepreneurs have “discovered Facebook” – everyone is talking about it on blogs and in pitches (as in “we are going to build a Facebook app for X.”)

A week ago, I started thinking that there was a key problem with Facebook.  This problem is directly linked to the absolute strategic brilliance of the Facebook folks around the launch of the Facebook platform.  This problem is clearly articulated in in the post “I have 250,000 users, now what?”


Be patient – you get to hear the problem in two paragraphs.  Last week, I started saying to people “Facebook is a substitute for television.”  I don’t think I made this up (I’m sure someone else said it first), but for the last decade many people involved in the Internet have been searching for the pure substitute for TV – what will you spend your online time playing with instead of sitting and passively watching TV.  Facebook finally seems to be the tipping point for this.

Granted – Facebook is active, not passive, so it’s theoretically better for the human brain.  However, in my interaction with Facebook, I’m still in “complete playing around mode” – I haven’t been able to derive any real discernible value from any of the hundreds of ancillary applications that are appearing.  Some are just plain silly (but often clever) time wasters; others are just republishing of content or reorganizing capability that I have through some other application.  None of this is the “problem” – but it’s the root cause of it.

The Problem: As of today, Facebook is deriving massive benefit in all the application development that they’ve enabled.  They’ve brilliantly created an open community that allows developers to quickly create applications that can rapidly acquire hundreds of thousands of users.  This dramatically extends the functionality of Facebook by offloading the R&D and feature development to the apps developers.  (How about all of them there adverbs – I sound like a press release.) However, as far as I can tell, none of these Facebook apps developers are deriving any real benefits (if you are a Facebook apps developer and ARE deriving a tangible benefit, other than customer acquisition within the Facebook infrastructure, please weigh in.)  In addition, Facebook has shifted all of the infrastructure costs to these apps developers, creating the “I have 250,000 users, now what?” problem.


It seems like Facebook could easily turn on CPM based ads on all of the Facebook apps pages and do a revenue share with the application developer.  Suddenly, the application developer would get paid for the massive new page views they are getting (as would Facebook), and Facebook would create a real incentive for the publishers to stay with their apps and grow them. 


In the absence of this, Facebook is going to need to address the “value to the apps developer” quickly, before some of the larger apps vaporize due to the developer saying “I’m not willing to keep paying for servers and bandwidth.”  I can think of a couple of other approaches here, including Facebook building an in-the-cloud infrastructure for their developers that they make available to one’s that reach a certain level of popularity.  But – the straight “we’ll make more money and share it with you” seems the most logical approach to me.