Caught in Web 2.x
Look at where we are headed, in terms of the internet, what we pay attention to, where we spend our time, and how we communicate. The world is heading towards increased openness of information, trust in large companies, and increased addiction to real time updates. The web is moving from computer browsers to cell phones and even gaming consoles are getting involved. It’s new, terrifying and exciting all at once.
To see friend of mine told me today that he can view most of his browsing history on Google, with analysis of his past trends and a comparison to the rest of the world. That’s because browsers allow any website to see the contents of your address bar for every other window and tab, so as long as you have Google open somewhere, it can gather statistics on you. It’s reassuring that Google’s unofficial motto is “don’t be evil”, but sometimes it’s unnerving to know just how much information they have on you.
Search engines have been around for years. There’s a new juggernaut in town, and that is the power of the network effect: the more people use a service, the more others are compelled to use it. What might be a little scarier is the power of the network effect in the hands of proprietary companies.
I am intimately familiar with these issues, since I’ve been studying what makes viral phenomena work. One of the main factors is user perception. Many years ago there was a site called “whimit.com –Â Russians Online”. It was a social network — perhaps way ahead of its time. It was free to the users and made around $100,000 a year in its heyday. When facebook came along, it did things slightly differently — it was visually clean, and for college students. It also kept adding features, like the news feed. When whimit users realized that most of their non-Russian friends were on facebook, they migrated over.
I met some tourists on the train the other day. The man was from England, the woman from Spain. At the end we wanted to keep in touch, so I asked them both if they had facebook, and we exchanged names. Why ask their numbers? How quaint. Almost “everyone” has facebook now. And it seems much easier to ask their “facebook” — which happens to be their full name — and soon see all the friends photos notes and other items they let people see online.
It is interesting to ask what sites or companies will be the dominant players in 5 or 10 years. When we looked at products, it seemed pretty realistic that new, better products could come along and people would migrate over. If a better search engine came out, we could just use it. However, with the new reliance we have on social websites and our email box, it is hard to imagine moving to anything else. When all your friends are on facebook, how can you leave? The more a site becomes a part of our lives, the more stuck we get in . The web really starts to get sticky.
Not too long ago, I read an interesting viewpoint: Facebook calls itself a social utility that connects you with friends. In fact, it is becoming a utility, just like your water, electricity, or telephone. It already does more than your telephone. Consider this: even if facebook never figured out how to turn a profit, and kept losing 100 million dollars every year, investors would still fund it year after year. Because it is too big to fail. Imagine one day waking up and going to check your facebook and seeing “we’re sorry, but we have run out of funding. Facebook no longer exists. Thank you for having taken part!” The fact is, the more invested we are in something, the harder it is to leave. Similarly for marketers and new startups. There are very few places where so many people signed up with their real name, age, sex and actively update their friend connections. (Google and Yahoo come to mind, but facebook’s the only one where people are used to constantly giving out their real name.)
The fact is, facebook is fast becoming too big to fail. Google is very very big and does a lot of things right. But if Google suddenly ceased, companies buying adwords and publishers getting revenue from adsense would be hurt, but the average user could, say, go use Yahoo. If facebook ceased to exist one day, there would be a revolt. And facebook’s user base is already larger than most countries…
The utility bill is pretty high for these new sites, and goes up the more real-time, media-heavy, and popular it is. Twitter reached a deal with many cellphone carriers to be able to multicast text messages. Facebook stores each and every photo uploaded, indefinitely — even if you click “delete” on the site. That alone is terabytes of new information to store every day. Youtube’s burn rate in 2007 was around to $1 million a month, and is probably higher now. Online video and content delivery is growing, and has sparked debates such as the one about net neutrality and who should foot the bill for all that bandwidth being used. Since buying Youtube, Google may be losing money with all those bills (copyright-related lawsuits don’t seem to be a big problem for it). But youtube is a cultural tool now, with presidential debates being aired on it. It seems our future internet will continue consist of free services with huge numbers of users — even if they lose money — supported by advertising, targeted and tailored to our browsing habits as much as possible.
Finally, let’s consider a potential implication of all this. Suppose facebook simply decides to turn a profit by charging its users for use of the site. One day you wake up and find on your home page something about a new Terms of service:
“Facebook has always strived to provide its users with up-to-date information about their friends. In order to continue providing services to our 800 million users, we can no longer keep all the features free.”
Can you afford to opt out of this “social utility” when all your friends are making updates on it? Let’s face it — the more useful a service is, the more invested you are in it — the more reluctant you’d be to stop using it. Even if it means having to pay. Yes, facebook could present an option for you to pay $1 a month for it, and later jack up the price to $10 a month once everyone gets used to the idea. After all, many of us have already given them our credit card info in order to send virtual gifts to a friend; and many more will enter it as part of the new Facebook Payments feature. What’s $1 a month, anyway? Okay, later they might raise the prices like the MTA (subways and buses in New York City). Then it really will be the social utility.
Sure, lots of users may revolt and form groups like “Stop Facebook From Charging”… they may even become 1 or 2 million strong. But they will probably be found among all the other groups, like “Don’t Let The Democrats Rule Us All”, and will be too poorly organized to stop the other 230,000,000 users from continuing to use the site at $1/month. Whoever wields the network effect can build a powerful web, indeed.
And maybe in the end, isn’t the internet becoming a public service we are all paying for anyway, in one way or another?
Posted on June 5th, 2009 by admin
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