In 2007, when Facebook opened its platform to developers, it seemed Facebook was using Microsoft’s playbook—let developers create apps using their platform and see what apps succeed (just like Microsoft did with Lotus 1-2-3, WordPerfect, and Harvard Graphics). Then acquire or clone the successful ones (Microsoft Excel, Word, PowerPoint) as the cash cows and leave the crumbs (relatively speaking) for others. But something seems to have gone wrong—the third-party app ecosystem is not exactly thriving and Facebook still has no cash cows like Microsoft does (Office and Windows).
Instead, Facebook is increasingly looking like Yahoo!—it does everything from Photos and Chat to Email and Places. It provides just enough features to be functional but leaves much to be desired, and increasingly depends on advertising as the revenue model.
Until recently Microsoft had the largest market cap in technology (it’s Apple now). Here is what Facebook should steal from Microsoft’s playbook.
Facebook Must Make Sure The Third-Party App Ecosystem Is Thriving
This is important for two reasons. One, it keeps the platform alive and vibrant for users—Windows would not have been very interesting or successful if all apps came from Microsoft. Two, successful ideas will come from this ecosystem. If the Facebook platform is not viable for app developers, they will continue to look for alternatives and someone will crack the social graph code sooner or later elsewhere. For instance, Apple’s iPhone is becoming a meaningful platform for app developers.
It seems Facebook has thrown the baby out with the bath water when it comes to communication channels that were being abused by some app developers. I used to play Scrabulous on Facebook. I tried playing Scrabble recently but the other player wasn’t notified that it was her move! Since then I started playing Words with Friends on iPhone and it just works. As soon as my friend makes a move, I get a Push Notification. Facebook should handle notifications the same way as publishing on the Wall—ask users for explicit permission to send a notification to a friend.
News feed stories increase engagement and discovery for apps. But the volume of stories generated has forced Facebook to algorithmically decide what stories to show on the home page. Have you visited FarmVille or Causes lately? They both prominently display friend activity on their home page. Why? The same reason that made Facebook so successful—users can see what their friends are doing—an explosive mix of social discovery, social proof and voyeurism. This is where I see the solution for resolving the battle for news feed stories between Facebook and app developers. Instead of each app trying to implement its own friend activity, Facebook should provide an easy way to display the app-specific news feed inside the app. At the same time, Facebook should continue to bubble up interesting stories on its home page.
That leaves the problem of app discovery—reaching out to new users who are not yet app users. If social discovery is going to be the killer app for Facebook (I will come to that in a moment), app discovery is just a small part of that. Showing apps used by a user on their Profile, as Facebook used to do before, is a good start. But when it comes to discovery, Facebook can borrow from another playbook: Google’s. Some developers will be happy to pay for leads. How about sponsored links just above the organic list of apps used?
Facebook Must Find Its Cash Cow—Fast
To me social games like FarmVille seemed like a cash cow. Facebook should have acquired or cloned Zynga. It seems Facebook has chosen a platform angle instead, namely, advertising and Facebook Credits, which has the potential to be a cash cow for Facebook.
However, I believe, “social discovery” is potentially the killer app for Facebook. If you are like me, you discover new restaurants because a friend recommends or takes you there. I always ask my friends about new movies—I know which friends have similar taste as me,and which ones I can safely ignore. The list extends to TV shows, plumbers, books, music, kitchen appliances, and gadgets. (Facebook’s Photos app has become so popular mainly because of social discovery of new photos uploaded by friends. Tagging is just a mechanism to facilitate discovery.) When I buy a book on Amazon.com, I should be able to publish a story for my friends (but not an automatic story—remember Beacon?). When any of my friends clicks on the action link or completes the transaction, Amazon would pay Facebook. Such sponsored feed items should be clearly marked and shown prominently just like sponsored links on Google.
Facebook should look to Microsoft for its playbook to make its platform more developer-friendly, but also sprinkle in a bit from Google’s sponsored links and apply them to social discovery.