February 2011 – DAN REICH

What Facebook Really Means

Image via Wikipedia

I’ve been spending a lot of time lately thinking about Facebook and the implications it has on our daily lives, our communications, and our buying behavior. I’m starting to come around to the belief that Facebook truly is, first and foremost a data company in addition to being a portal for social news and activity. That’s really it and its nothing we don’t already know. Facebook will most certainly evolve and offer more compelling features like daily deals, FB credits, or even a mobile OS, but at the core, their foundation is simple. My friend Brad has been thinking about what this means in the context of historical companies and products, so I extended this line of thinking to see what I’d come up with and here is where I currently stand.

AOL vs. Facebook
AOL was first and foremost an ISP in addition to being a closed portal to various content and communications channels. Users were able to log in to their AOL account and then immediately access things like their AOL profile (what is now Facebook), their Instant Messaging and away messages (what is now Twitter), their news (what is now every news site out there), their mail (what is now GMail), their games (what is now Zynga), their chat rooms (what is now BBM, SMS, Meebo), etc. What started off as an ISP quickly became a portal for various components of one’s digital experience and to me, this is starkly similar to Facebook.

Facebook on the other hand started out as first and foremost a data company in addition to being a portal to various social content and news feeds. Users are able to log into their Facebook account and engage their entire social network of friends. Perhaps the biggest difference between Facebook and AOL is that Facebook lets users carry their identity with them online, while AOL did not. So today, if a user wants to read the news, or play games, or chat with their friends, they can do so under a uniform identify that is portable across many digital platforms. To me, this is nothing more than a driver’s license for the web which in time will become a credit card for the web.

With this said, I think its interesting to see what happens when you slightly modify the rules of open vs. closed. AOL was a very closed environment and it was only a matter of time before it got hacked up into new, competing companies. Facebook however, although still very much closed, is enabling others to access its rich database thus making it a platform for a greater social web – a Driver’s License. Other than that, I’m not sure what other interesting take aways we can learn from this comparison.

Microsoft vs. Facebook
Microsoft was a software company built to manage productivity and utility. At its core, it had an operating system that enabled specific apps which were all designed, in some way shape or form, to enhance one’s ability to be productive by leveraging digital connections on the internet, and within the very PC (between memory, the hard disk drive, CD rom, etc). Productivity was the key word here and it fueled 10 years of growth (e.g. MS word, excel, IE, Powerpoint, etc).

On the other hand, Facebook is a data company built to manage and facilitate social connections. At its core, it is a centralized data base that houses self-declared information (e.g. age, gender, location, interests, etc), and on top of that data base, it has apps that are designed to leverage these pieces of information (e.g. groups, walls, friend recommendations, etc). “Social Connectivity” is the key word here and i think we can agree that it will fuel the next 10 years of growth.

With this said, I think the Microsoft vs. Facebook comparison is a little better than the AOL analogy but I’m still not sure it does us justice to understand the full effects of Facebook. I don’t think we should look at Microsoft as the comparison to gauge what Facebook means, but instead, I think we should be looking at historical events that involved social movements. Things like voting, protesting, activism, wars, diplomacy, fundraising, emergencies & triage (healthcare), events, etc. I think the next wave of innovation (on the consumer side of things) will be about taking timeless human events (like buying things) and overlaying a precise data set and pure social connectivity layer (e.g. Facebeook). Because in each one of these social events, there are very different use cases, with a very different way of using and looking at the data.

A Focus Group of 1

As we continue to build our business at spinback we continue to engage in a number of very interesting conversations on the topic of product recommendations and sharing. Jared Spiegel, a friend of mine and someone who is currently participating in the Brooklyn Law Incubation Program (BLIP), made the following point that I thought really highlights the core of why product sharing is so valuable. His point is this:

Suppose you are interested in purchasing a new bike. The single most important thing that you are looking for is durability and reliability. That is, you don’t care about looks, design, or wheel style – what you do care about is the frequency of repair. As a reasonable and sensible person, you consult Consumer Reports and learn that the bike with the best repair record is clearly a Schwinn. No other bike even comes close. Naturally, you decide that the next day you are going to buy a Schwinn bicycle.

Suppose that the night before you are going to make your purchase, you are at dinner with a few friends where you announce your intention to buy a new bike. One of your friends at the table says “I just bought a Trek bicycle last week and I love it! It’s much better than my rusted, beat-up Schwinn. In fact, I’ve never been so happy with a bike in my life!”

Let’s suppose that the ranking you read on Consumer Reports was based on a sample of 1,000 bike owners. Your friend’s preference for his Trek bike (and distaste for his old Schwinn) has increased the size of the sample to 1,001. It has added one negative case to your statistical bank. Logically, this should not affect your decision. But a large body of research indicates that such occurrences, because of their personal character and connection between the purchaser and the source of the information, assume far more importance than their logical, statistical status would imply. All other things being equal, most people are more deeply influenced by one clear, personal example than by an abundance of statistical data.

So even if there is a large data set that crunches consumer reviews looking for the very best product, it really only takes a focus group of one and a personal connection to influence someone’s buying decision.