The Business of Facebook Applications:

Social Graphs, Applications, and the Future of the Web

Graphing Social Patterns

Reid Hoffman, 9 Oct 2007

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?

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

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

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

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

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?

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

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

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

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

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

Questions