Tuesday, November 16, 2010

The Decline and Fall of the Facebook Empire (part I)

There is a hard lesson that Internet titans learn eventually. AOL was the first to learn it, and it led to their long, drawn-out demise. Yahoo learned it, and is now a shadow of its former self. Microsoft and Google have both come up against it, but been reasonably successful in avoiding it; the former by shoveling money at the problem, and the latter through sheer heroic engineering effort. And, with yesterday's announcement about a unified messaging system, Facebook is about to learn it - and doesn't have the resources to power through anyway, like some others.

That lesson is this, and comes in two parts: when you integrate your services, you're actually competing with the Internet. And, when you compete with the Internet, you lose.

The First Thing

Why does integration equate to competing with the Internet?

Let's say I think this new messaging platform is awesome. IM? Great, all my friends use Facebook chat anyway! SMS? Sounds pretty cool! Email? ...Wait, hold on a second. You mean I have to give up GMail to get all the benefits of this integration? :(

In other words, this kind of integration is a form of soft vendor lock-in: they make it more convenient to use all of their services, rather than using the best of what the 'Net has to offer. AOL is probably the strongest example of this - back in the day, they combined an ISP, web browser, and email service into one package. And, they quickly started hemorrhaging customers, because they couldn't compete with the best ISPs, browsers, and email services all at the same time.

See, savvy Internet users know how to mix and match services. Back in the '90s, AOL wasn't just competing against all the other companies in the same space - it was competing against every possible permutation of an ISP, a web browser, and an email service that people could come up with. And today, Facebook is trying something similar. By combining a bunch of similar services under the umbrella of "messaging", Facebook is competing with every possible permutation of messaging services available online.

And here's the kicker: They're not just competing with every permutation of services that do the things they do. They're also competing with every new service that lets people communicate. They don't have an answer for things like Skype, for instance. And the thing about new services is, there's never a right answer for how to deal with them. The only right answer is not to put yourself in a situation where you're pressured to mimic every new technology that comes along.

I mentioned earlier that the savvy Internet users can often find better combinations of services than any one company can provide. What about the non-savvy users? They stick around, sometimes for years after a service has lost its vitality, and you end up with digital ghettoes like Hotmail and AOL. That's how I see yesterday's announcement - it's Facebook's first step toward becoming yet another digital ghetto.

(continued in part II, tomorrow!)

1 comment:

Nick Luchsinger said...

I'm not sure who really pulls the strings at Facebook these days, but I assume it's still people who are aware of the fact that the only reason they aren't up to their neck in competition is because they have digital hostages in the form of trapped user data and, as you mentioned, a big, integrated, and somewhat isolated ecosystem. They know they can get away with it for now, hence they probably plan to keep this up until they see that it's not going to work anymore, at which point I think they'll sensibly give in to user demands, free up some data, and act like good guys. I say this because they're young, and I bet they've seen the pattern you're describing enough to know that it's perilous. So unless they just get really stubborn, they might have the sense to just backpedal as needed.