New Eyeballs
Thursday, June 12 2008
Most of us remember the late 90's, when the entrepreneurial call to action on the Web was to capture as many eyeballs as possible, and worry about monetization later. It was justified at the time as an exercise in brand-building, supported by the belief that if you build it, they will come. It seems that people have been reminiscing about this more and more lately as part of the Bubble 2.0 chatter that has been going on for well over a year now. But a new meme has come to the fore in recent months, catalyzed in large part by Facebook's decision to allow developers to build third-party apps on top of the core social networking service. In other words, Facebook has decided to be a platform. See here. Ever since then, the preoccupation with all things platform has taken the Web world by storm. Mark Zuckerberg's star has risen even more, $10+ billion valuations are bandied about, and the VCs, true to form, are right there in the thick of it (more on that in a minute).
But let's back up a second and look at what's motivating this...the purpose of a platform is to encourage extensibility in a way that drives adoption of your core offering (in this case, a social networking service). But extensibility needs to have a profit motive. Who is turning a profit on Facebook apps? There are some wildly popular apps, such as iLike and Picnik, and widgets like The Compass from the Washington Post, but for all the articles and blog posts I've seen about the ever-growing interest in building apps for Facebook, I've not seen any real numbers. Is anybody really making any money here? The VCs, true to form, are jumping off the cliff yet again without any clear monetization roadmap for this category beyond the tried & true ad-funded model. Case in point: fbFund, announced earlier this month at TechCrunch40. Facebook has gotten Accel Partners and Founders Fund to pony up $10 million to be doled out to startups doing apps for Facebook, this on the heels of Bay Partners' announcement of AppFactory, a $12 million fund specifically for apps built on Facebook platform. Despite the fact than many of the current apps even have the venerable shareware/freeware tip jar ("If you like this app, feel free to donate..."), the fixation on platform has the Web world buzzing. I'm convinced more than ever that 'platform' is to Web 2.0 what 'eyeballs' was to Web 1.0, and we all know how that ended.
So speaking of endings, where does all this go? Well, beyond the issue of whether or not there is a long tail that can actually make money, there's the relationship of the platform to the app. I love how everyone with a platform of any sort will use "open" as the default modifier for their offering. Let's face it: if you develop an application for Facebook, that app is forever tethered to that service entity. Is this really the cure for vendor lock-in? "Open" as a first-order principle is a fine thing for vendors to go espouse, whether they're selling software in a box or services on the Web. But in many ways it's lost its meaning as the developers of this new generation of apps, many of them small, seed-stage companies, think more about the short term need to bootstrap their budding ventures with the reach afforded by Web-based platforms and the monetization opportunity w/ads, and less about the long-term implications of being hitched to that platform. This becomes especially relevant in an environment where old media gets increasingly interested in new media M&A, as News Corp showed us with MySpace.
Facebook will continue to grow, and likely succeed long term. But it's success as a platform depends on the success of its ecosystem (or its 'social graph'), and I very much doubt the startups (and the VCs who funded them) will be satisfied with the long tail of monthly $3 checks for the handful of users that clicked on their ads. And the walled gardens that service entities essentially are put a well-defined boundary around the addressable market for these seemingly fast-growing startups. I swear I've seen this movie before.
