If facebook is not ashamed of calling itself a utility, why are other networks and mobile network operators ashamed of being a ‘pipe’?

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If facebook is not ashamed of calling itself a utility, why are other networks and mobile network operators ashamed of being a ‘pipe’? ?

Will they continue to extol the virtues of their closed models as they ride into the sunset?

Let’s start with a few general stats about facebook from Dan Farber’s blog

General Growth

• More than 24 million active users

• More than 100,000 new registrations per day since Jan. 2007

• An average of 3 percent weekly growth since Jan. 2007

• Active users have doubled since Facebook expanded registration in Sept. 2006

User Demographics

• Over 47,000 regional, work-related, collegiate, and high school networks

• More than half of Facebook users are outside of college

• The fastest growing demographic is those 25 years old and older

• Maintain 85 percent market share of 4-year U.S. universities

User Engagement

• Sixth-most trafficked site in the United States*

• More than 40 billion page views per month in May 2007

• More than half of active users return daily

• People spend an average of 20 minutes on the site daily*

Applications

• No. 1 photo sharing application on the web*

• Photo application draws more than twice as much traffic as the next three sites combined*

• More than 1.8 billion photos on the site

• More than 6 million active user groups on the site

International Growth

• Canada has the most users outside of the United States, with more than 2.5 million active users

• The U.K. is the third largest country with more than 1.4 million active users

• Remaining Top 10 countries in order of active users (outside of the U.S., Canada and UK): Norway, Australia, South Africa, Lebanon, Egypt, Sweden and India

Also from the same blog ..

Facebook CEO Mark Zuckerberg calls this latest iteration of the service a “social utility,” which is an apt term. It’s a utility in terms of a tool for the 24 million Facebook users, but it also reflects Facebook’s desire to become a utility, like a power company, in which potentially billions of people use the service in their personal and professional lives. Facebook, MySpace, and other growing colonies of linked communities with semi-permeable walls represent the rise of the social Web and Web utility companies.

Zuckerberg describes the Facebook core function that the new third-party applications can tap into as a “social graph,” the network of connections and relationships between people on the service.

Read that last bit again ..

Facebook’s desire to become a utility, like a power company, in which potentially billions of people use the service in their personal and professional lives.

Sounds like a pipe to me .. i.e. a utility ..

Talking to many Mobile Operators and many other social networks like Ryze, Myspace, Ecademy etc etc .. that’s the LAST thing they want to be ! i.e. a utility ..

In that sense .. its ironic is it not that this ‘pipe/utility’ is valued at $10 billion or more - while valuations of most Mobile network operators and other closed networks continue to languish ..

There is a lesson here ..

And it has to do with the network effects i.e. the market is paying for existing rate of growth, future rates of growth and competitive advantages .. (look at the scramble for survival from linkedin and others to emulate FB )

This is not new .. in fact .. it’s as old as the Internet itself .. i.e. any network that can emulate the open ethos of the Internet .. can grow at a phenomenal rate ..

I talked about this in a blog called Salt Pepper and Social networking ..

As I said in the Salt, Pepper and social networking ..

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And what is the ethos of the Internet? It’s something I have been advocating to Mobile network operators for years now .. You can summarise it by the phrase: ‘Dumb pipes and Smart nodes’

The network (Internet) itself is ‘dumb’. Its only job is to ‘connect people’. The value is provided by the nodes (the people / systems that are at the ends of the pipe). Jonathan Schwartz summarises these ideas in the Power of the end nodes (AKA: ‘the network is the computer’). I believe that the same phenomenon applies to social networks on the Internet. The moment you introduce tiered membership, complex pricing models and so on, you hamper connectivity. The effective size of the network decreases because all members can’t do all things.

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So closed network, telecoms networks as they are today, social networks which have a fee structure .. win the battle .. i.e. make some money .. but lose the war .. i.e. have low valuations due to poor growth rates.

In fact, with the rate of growth of open networks – they may well lose the battle to survive ..

The battle for being a ‘pipe or not utility vs. non utility’ is sooo Web 1.0 – most people don’t realise that in a world of connectivity there is no unpipe!

And there in lies the success of facebook i.e. simply in connecting people and let intelligence shift to the edge of the network(think facebook applications)!

Sadly, many will never get it – and will continue to extol the virtues of their closed models as they ride into the sunset ..

Image source: noopportunitywasted

Comments

  1. Julian Bond says:

    And yet Facebook is the very opposite of Web 2.0
    - Almost no RSS
    - No external APIs
    - All content is hidden away behind the login box.
    - Content is hidden from Google and other search engines
    - No way to export information you post into it.
    And of course
    - No rounded corners, lime green or pale blue!
    Not exactly an “Open Garden” is it?

  2. Ajit Jaokar says:

    good points JB(more about openness – than about rounded edges!). A subject of another blog! rgds Ajit