The Business of Facebook: Social Graphs, Applications, & The Future of the Web

Slide 1: The Business of Facebook Applications: Social Graphs, Applications, and the Future of the Web Graphing Social Patterns Reid Hoffman, 9 Oct 2007

Slide 2: Observations and Themes • Social Networks and Platforms – The discussion in 2003; the discussion now – Contrast: Facebook, MySpace, Ning • Social Networks and Professional Networks – Differences in use cases • One graph to rule them all? • Facebook Platform: some of the opportunities enabled • What does the social platform mean for the evolution of the web?

Slide 3: Social Networks and Platforms • In 2003 -- the debate around Web 2.0, social networks: what was new? – Feature vs. Application vs. Platform • Temporal History – MySpace: ability to hack in “widgets” – Ning: the platform for building any type of social network – Facebook: the first platform on a broad social graph • Why are Social Networks platforms? – Social network embodies key data for applications useful in the real world – Early example: Friendster as a Dating Application – This data + consumer engagement = channel for these apps • Key Elements of Facebook’s platform – Extend functions of profiles, communications, newsfeed – Integrate general web applications with data, relationships, and communications

Slide 4: Social Networks and Platforms • Facebook and MySpace – MySpace: integrate “includes” of widgets – MySpace has something like a social graph of linkages, • But no access to a real set of relationships • And no access to key data (user, profile) • And no platform access – No access to communications or newsfeeds • Facebook and Ning – Ning: program your own social network • Control of policy, set-up, feature set – Facebook: build upon massive social graph • Acquire customers • Leverage key relationships • Leverage existing communication scheme • Facebook: platform leverages a communications architecture and a newsfeed “sharing” space

Slide 5: Social and Professional • Facebook and Linkedin: Different use cases – Search • Contrast: search by name • Contrast: search for “open source expert” • Contrast: search for pictures • Contrast: search for company connections – Answers • Contrast: answers application(s) vs. Linkedin Answers – Messaging • Contrast: messaging environments (brokerage vs. general sharing) – Services + Jobs • Simple misconception: any communications infrastructure can be used for anything. • Where is there interesting overlap? – Public profile presence – Potential business applications upon the social graph

Slide 6: One graph to rule them all? • Will there be one social graph platform? – First: is there only one social graph? (Where do Friendster, Tagged, Hi5, Bebo, etc. fit in with this) – Second: is there one graph which contains each different sort of relationship (friend, family, acquaintance, professional, etc.)? • My theory: there will be multiple “graphs” – There may be multiple social graphs: semantics of the connection • N.B.: the odd population of graphs, such as Orkut and Brazil – One graph that includes all of the types of relationship in one perfectly orchestrated universe: not! • This is the geek, blogger dream. – It may be important to have different baseline rules on different brands and different networks. • Fortunately: a massive valuable platform does not require the truth of there being only one big social graph. – A wide platform is sufficient for an interesting ecosystem

Slide 7: Facebook Platform: possibilities • Studying current applications – Communications: walls, poking, gifts, mail – Games: the obvious but also • Comparing people – Music and Media • Movies • Future possibilities (likely) – Iterations off major use cases today – Interesting to see what happens with “friending” applications, like Top Friends – Honesty box • What’s new? – The theory of platforms is to enable tons of creativity – What other apps would be in a 1-1, 1-many, many-many communications environment with your friends?

Slide 8: Facebook Platform: limits • Is there a limit to how many applications any user will have? – Rising above the noise – Why the metric that Facebook reflects shifted to focus on number of active users • The areas that have not worked (thus far): – Business – Politics – Money • The challenge of the “second act” – Just like the web: the discovery of interest is hard – But: the key thing is the “second act” • Role of creativity

Slide 9: Facebook Platform: economics • Today: parallel to the internet gold rush – CPI Installs – Run of site ad inventory – Ad network aggregation • Challenges Today: – Applications inserting interruptive ads as ways to generate income – Incented installations – Installations financed by future hope (not sustainable) • Future possibilities – Targeted ads – Virtual or real currency • Platform innovation? – Developers – Facebook

Slide 10: Platform: economic analysis • What will be certainly the case: – Low cost apps with sufficient sustaining appeal – Applications that fit the Facebook use cases – Evolution of key use cases • What is still up in the air: – Establishment of substantially new use cases – Major applications • Massive competition a la the web: – Someone else will try to give away anything you charge for – At least three people will try to copy anything that works – Competition from companies and from individuals – People will experiment, but stickiness will matter • Key factors: distribute, use, retain -- plus economics

Slide 11: Facebook and the Web • One angle: new patterns of eMail and communication – Sharing – New cycle of communication: the genius of Facebook photosharing – Look forward to applications the replicate that genius • Future of discovery of the web? – Discover through friends and sharing: certainly a piece – Certainly discovery of people’s social lives • Applications and the platform: – Can one website be everything? – Social graph -- applications • What does the microcosm mean? – Not one graph to bind them all, but an interesting new world

Slide 12: Summary • Many of the new interesting entrepreneurs from college will first write Facebook applications • There will be an interesting ecosystem between websites and Facebook applications – iLike (music) and Flixter (movies) – Websites establishing their position (contract, acquisition) • Economics will be a real issue (just like the web) – General recommendation: keep costs low • Constant newness will be important for entertainment – Facebook accomplishes this through the platform – Applications will need to keep this going

Slide 13: Questions