Facebook Kremlinology

As word comes out about other investors in Facebook, I find myself still thinking about the significance of the Microsoft investment. Steve Ballmer admitted at Web 2.0 (video, jump to about 20m in) that the advertising deal with Facebook doesn’t make them money. So is he doubling down on the bubble? The valuation is staggering. Not yet AOL-level ludicrous, as Facebook hasn’t suggested buying Microsoft. But, you know, give it time.

Facebook is very much an AOL closed garden and vulnerable in the same way that AOL was vulnerable to the Internet. It may yet suffer a riches-of-the-niches death-by-a-thousand-web-cuts. I’m glad in many ways that Google didn’t win the bidding war, if indeed there was a bidding war. Were they really actively bidding? Did they only find out today that they lost? Were they only doing it so Microsoft would have to pay ZILLIONS more than Facebook’s really worth?

Google can create the riches-of-niches world by promoting and implementing Fitzpatrick and Recordon’s ideas, and thus set fire to the big pile of money that Microsoft and others just put on the table.

I’m also thinking about where Facebook might be weak. Facebook aggregated users with a killer app. They’re now pimping those users out to third party application writers for hits (and thus revenue). Nobody’s been thinking about the user experience, except for Facebook’s cutback on emailed invites from apps. I think it’s critical.

Facebook apps seem to be microcosms of the Internet—photos, games, movies, pointless wank—with friends. In other words, Facebook brings the user and their buddy list and the app developers bring everything else. Down this path lies Facebook as a smaller-but-social Internet, the hub for all these social apps.

Facebook’s Achilles heel is the user experience of this micro social Internet: how do you find the useful and interesting apps in the ocean of zombie dross that has already emerged?

In the real Internet, people use brands (“Flickr”, “Amazon”, “Addictive Games”) to go straight to sites and Google to find those they haven’t dealt with. Will they really turn to Facebook instead of going to a photo/movie/game/pointless site instead? Not unless Facebook makes the user experience of finding stuff better than both Google’s current experience and the experience of a web of social apps powered by the Fitzpatrick-Recordon decentralized social network. I think this is the biggest weakness and threat to Facebook.