From Istanbul To Sand Hill Road

The Facebook Platform and Its Impact

Without a doubt, the facebook platform is the most impactful event that happened in the internet in 2007.  A lot has been written about it, from Marc Andreessen's great post on how it works, to Dave McClure's colorful and passionate (the blogosphere needs more of both) descriptions of how to make it work, to a plethora of articles on why it won't work.  But what is the big picture?  What does this move mean to VCs investing in social networks and entrepreneurs running them?

To start let's define two things that make a social network; the app and the underlying social graph.  On a site like dogster, the application is "dogs" and the social graphs are the groups, the messages, the profiles, friends and comments.  Features are added to the app by the company, and users add to the social graph.  "Dog of the week", "dog blogs", "dog videos", "local dogs" are all features of the app, and how the users interact with each other what friends they make are the social graph.  Sometimes the apps grow a lot bigger than the social graph, sometimes the social graph grows a lot bigger than the app.  In the case of myspace the application started as voyeurism and music, but the social graph grew so big and spawned many other applications.  In the case of youtube, the application of sharing videos got so big that the comments and profiles, the social graph got dwarfed even though those features were there.

What's important is that regardless of the outcome, a lot of companies got funded as "social networking for X" where X could be fantasy sports, trendspotting, dogs, cats, vampires etc.  The formula that got VC funding was, "take an application that people know, and build a social graph around it."  The hard part wasn't building the application but getting the users.  It was all about getting users, building the social graph.

What facebook did was turn this upside down.  They said, "we have a social graph, why don't you build an app on it".  In their platform you start with the social graph and build the app on it.  Since the hardest part of building a social network is getting the social graph, facebook effectively gives this to an application.  This is what's so impactful about the platform.

It's because of this paradigm shift, there are apps with 9M users in under 2 months.  Facebook gives the app maker a social graph to work on the app maker grows fast, adds back to the social graph, grows it a little bigger, benefiting the next app and most importantly facebook that owns the social network.  They own the most important, hard to do, defensible, valuable piece of any social network, their users.

By owning the social graph they are controlling what makes the network work, they control the operating system.  As networking guys will realize instantly, facebook becomes the "IOS of social networking".  Hopefully, the application developer learns to monetize their apps (haven't seen a good example yet, doesn't mean I won't) and everybody wins.

Facebook took a good killer app, your desire to know what your friends are doing, aka, your social graph, and turned it into a platform.  The killer apps of today are the platforms of tomorrow.

So what does this mean for a social networking site?  The days of starting a site to build a user base on your own is over.  You will have to do it on facebook, otherwise your competition will and they will grow faster.  For those sites big enough to have a decent social graph, they still have to have a facebook presence, not to be left out, and will their current user base remain relevant if the facebook user base grows fast.  It's the old Microsoft adage "no need to build this, the operating system gives it free".  Over the years Microsoft took the top applications on windows and made it part of the OS.  This is the same story happening here and there is no stopping it.  Every independent social network has to keep a good eye for what's going on at facebook, and if I were them go straight there and stay there.  Yes, Microsoft got the lion's share of the market, but app developers on windows did well if they wrote the right apps.  But one thing is for sure, no app vendor made it big if they were not supporting windows.

Becoming the operating system of social networking is why the facebook platform is the most relevant thing that happened to the Internet this year.  They are on their way to become a Microsoft of sorts.

So what are they worth?  I don't think it's $1B, I don't think it's $2B, I don't think it's $3B.  I think it is more.  Who will buy them?  My bet is that it won't be any of Yahoo, Google, Microsoft.  They all have products that touch this, and they all have the capability to do this.  I think the buyer will be one that who is much less obvious, one for whom this move is way more disruptive and game changing. 

The next big question is, will they take a $10B offer?  I am not sure that they will. 

Sometimes Even Google Misses Big

This morning a poor soul entered the folllowing keyword in Google: "how to build road on a hill doityourself."  He wanted to learn how to build a road on a hill and wanted to do it himself.  Maybe it's for his driveway, maybe he's doing it for a living.  His motivations are interesting, but not relevant.  Neither were the results he got from Google.

The most relevant result Google gave him, the #1 spot they offered was my blog post on vertical search engines called, Do It Yourself Vertical Search, where I criticize the value of a lot of the vertical search engines out there.  My blog title has the words "hill and road" in it, the post has "do it yourself" in it, so a post on vertical search is the most relevant result for somebody looking to build a road on a hill.  I don't think I helped this guy at all.

Now, I thought this was amusing, but it is by no means rare.  When you put an entry in Google or any search engine that's 7-10 words long you are almost always out of luck.  It is in these long keywords 3+ words that search engines have to prove their worth going forward.  Shorter keywords searches all give you ads anyway, no matter what side fo the screen they show up.

Other search engines couldn't help this guy build his hill better either.  Mahalo suggested "King of the Hill" episode guides, before reverting to Google, though at least they said they don't have a relevant result at the top.  Over time they will fix this, and the link above will become relevant.

Yahoo didn't do much better either.  They also found my post but also confused the poor guy doing the search by telling him this:  "We have included results for how to build road on a hill do it yourself. Do you want results just for how to build road on a hill doityourself?"  This might look like a one-up on Google's way of dealing with misspellings, but is all this confusion worth that extra click you save the guy?

Anyway, I thought this was amusing, but I guess there is a point and that when it comes to long keywords, generic search engines are failing, social engines (and products like Yahoo! answers) have a shot of filling the void, and if you really want to learn how to build a road on a hill, go to Home Depot.

Fortune iMeme Conference & Richard Dawkins

I was fortunate enough to attend the 1st annual, Fortune iMeme conference.  Apart from hearing and talking to a who's who list of intellectuals and technology influencers, the audience also got to see products from promising startups like Spigit and Adaptive Blue.  I will write more about some of the specific, thought provoking panels shortly.

But for me, the most exciting thing about the conference was seeing one of my favorite authors, Richard Dawkins, in person. I saw him, and even had a good chat over lunch which was a lot of fun.  This brings me to the point of this post.  Richard Dawkins will be in Menlo Park tomorrow at the Kepler's Bookstore (can amazon.com do that, I ask you?) at 3:00pm.  More details for the event are here.  I highly recommend this event to my readers. They may find a surprise if they attend.

Entitlement vs. Obligation

A friend of ours recently told me this following:  "Americans treat their children like clients, Europeans treat them like apprentices of the family."  I don't know if the generalization is true, but it is worrisome to me that the former is very often visible.  Treating children like clients means, catering to their every whim, jumping through hoops to make them happy, just like a banker, lawyer, consultant would for their clients.  I see this a lot among my girls' friends in Menlo Park.  Treating children like apprentices means that the children do their share of whatever needs to be done.  They do what parents do, but at a smaller scale.  I see this too, but far less.

At the root of the comparison is the concept of entitlement and obligation, two sides of the same coin that shows up in many facets of life, but none as early as the development stages of a child.  When you treat a child like a client, you are sending him/her the message that they are entitled to be made happy.  That, it is their right, and it is the parent's obligation to provide it.  For example, I know 7-8 year old children who get paid by their parents to do their chores.  They are given the sense of entitlement.  When you treat your child like an apprentice to the family, you give them the sense of obligation, the sense of their role in the family.  This doesn't mean the children doesn't develop their self-esteem, it means that they are part of something bigger and not the other way around. 

It is this sense of entitlement that, over time, leads to carelessness for others, the environment, the neighborhood.  It is the sense of obligation that creates leaders, and entitlement that ruins them.  And it all starts at childhood.  Luckily there is a very simple litmus test, to see what side of the parenting spectrum you are on.  Again, I've seen this a number of times in multiple children over a lot of playdates.  Does your child come to you and say: "I am bored."  That's the litmus test.  If he/she does, he is expecting that you as the parent have the job to entertain them.  That statement is one of the biggest taboos in my household, and I've never heard it from my children yet. If I do, and who knows, I may, then I've been doing something wrong.  It is not the job of a parent to deliver entertainment, it is the job of the child to find it themselves.  And in a world filled with wonder and amazement, it is really sad to see that parents, in all their love and care, may miss giving their child the ability to see it and seize it.

Bypassing CAPTCHA

Yesterday I had a lot of comment spam on Typepad, offering the readers of this blog various places to find entertainment.  I had to deny my readers this pleasure.  In reality, I should have no comment spam, because to put a comment on this blog you have to go through a CAPTCHA (which is what's in the picture on the left).  But apparently, they found a way through. 

This reminded me a story I heard a while ago form a friend as to how spammers go about bypassing captchas.  The spammer has software that goes to a site that offers free email, in order to signs up and send millions of emails.  But there is a captcha stage that the computer can't go through.  The solution is to get regular people to unknowingly decipher the captcha.  The same spammer runs an adult page offering free pictures for anybody who goes through by signing through a captcha.  On the adult page they show the same captcha the email site was showing at that instant.  When the users deciphers it to get to his adult material, the computer takes the results, feeds it back to the free email site and goes through.  An account is created, the spammer sends a ton of emails and never touches that account again.

Great use of social media and the wisdom of crowds.

Anybody heard of even better ways?

The Evil I's

They say humans are motivated by greed and fear.  Lot of people know this.  But do a lot of people know that both greed and fear have chosen the two evil I's as their primary method of deliverance?

The first evil I stems from greed and it is called interest.  Interest as in an "interest only loan" or interest as in "a low 17% interest on your credit card".  You borrow money to consume today what you should be consuming tomorrow.  You buy a house you can't afford by borrowing a lot of money and paying a lot more interest.  The more greedy you are the more you want to have now, the more you lever yourself.

The second evil I stems from fear and it is called insurance.  Insurance as in "earthquake insurance" or "car insurance".  You pay to cover yourself from something bad happening to you.  You take a bet against yourself and spend all your life trying to win, and guess what, you do.  That's how insurance companies make money.  Insurance feeds on your fear.

If you want proof that humans are motivated by greed and fear, just look at the size of the banking and insurance industries.  QED

So beware the evil I's.  The object in the picture above won't save you from these kinds of evil I's.

Why do I write this?  Why now?  No particular reason, other than the fact that I recently bought a house and am just pissed that have to pay a lot more interest and insurance.  But that was my choice now wasn't it?