Facebook, at this week’s F8 developer conference, unveiled substantial changes to its “open” graph API. Today, we look at the winners and losers in this announcement.
The Open Graph
Before we look at the winners and losers, let’s recap where Facebook is going. A couple of years ago, the company unveiled the “Open Graph API”, which gave external sites the ability to add “like” buttons to their sites, and in the process allow end-users to things they like into their facebook stream, where they would be shared with their friends. This mean that a user could implicitly publish information to Facebook by just clicking a button. At that point, two things really happened:
- First, Facebook created a system that allowed it to better understand what people were reading because every time a like button is pulled down, Facebook can keep track of it and associate the information with the account of a Facebook user.
- Secondly, Facebook offered publishers a way to generate more traffic to their site by publishing content on Facebook that would return users back to their site.
This was a little creepy because it gave Facebook a tremendous amount of power but, in exchange, the company gave publishers access to more traffic so the agreement seemed balanced to everyone but the end users (which doesn’t matter, as we all know that “if you’re not paying for it, you’re not the customer; you’re the product being sold.”)
But it seems having access to that data is not enough for Facebook; now it wants more data so it can build better electronic profiles of its users. So this year, the company has decided that “Like” was not enough and they wanted to get users to give them access to anything they read on a particular site. So the company unveiled actions like “read, watch, listen” which allow developers to share all action data from a user after a one-time sign-up to the Open Graph API.
Mining the web… but not giving back
This time, the company is mining the web but the main beneficiary of those actions seems to be Facebook, which gets a better understanding of where users are when they are not on Facebook and what they are looking at. If we assume (and I am willing to take the bet that this will be the case) that most mainstream sites will start offering the new verbs, then Facebook will have one of the most complete understanding of a user’s demographic and psychographic profile. In other words, the data it will get access to is the holy grail of online marketing: users that can be tailored to based on extremely granular preferences.
That data can then be used to send ads that resonate with the user in the channels the user accesses most. Think this is crazy? Well, wait ’til next year’s F8, when Facebook unveils a tool to help external sites monetize their traffic better by targeting advertising based on users’ preferences. If this sounds suspiciously like AdSense from Google, it’s because it is part of the end-game. Facebook is no longer happy to have the largest site in the world, now it wants to have access to people when they are not on Facebook.
What’s fascinating here is that the data goes into Facebook but there is precious little information as to how to get it back out, making the word “open” a headscratcher as it is unclear how Facebook defines openness. To the Palo Alto company, it appears that openness is a one-way street: you open up your data to Facebook and in return Facebook “simplifies” the online experience by keeping your app on its platform. This is somewhat similar to the app store model offered by Apple and Google, where it’s OK to play as long as it is within their rules. Facebook is doing to the open web what Apple and Google have often been accused of doing, sticking another knife into its imminent demise.
Also of note is the fact that Facebook’s approach to getting all this data makes it impossible for anyone to create valid HTML5 pages as the Facebook code does not validate under this framework. So Facebook is also hampering the future of the web by making it nearly impossible to live by the ideal of the new web standards if you want to play in the facebook arena. This seems to shape up another fight between Facebook and the open web.
Another company has had similar ambition and it staked its approach first on offering superior search products and then on using the search data to target advertising on partner sites and eventually offer such capabilities to anyone who was willing to give them a percentage cut of ad revenue. That company, Google, has realized the limitations of its model and is busy trying to ensure it can get more data by building up offerings for ways in which people access the internet: so they’re pushing Android for mobile phones and Google Chrome as a better web browser because they want to be able to access data relating to where people are on the web, data that can then be used to create more customized ads.
Facebook at $150 billion?
This week, Google’s valuation sits around $150 and the highest Facebook has ever been rumored to be worth is $100 billion. I’d venture that people are selling the company short and that it is worth something on par with Google. It has masterfully played fears from online publishers and other sites and parlayed that in a potential position of power in the online marketing world.
The only thing that could make it more powerful than it is about to be is if it were to pair up its data with Google’s. A merger of the two of them would create an unparalleled database of internet users, containing just about anything about people’s intents (from Google’s search), their interests (from Facebook’s data), the amount of time they spend on certain properties over others (from either Facebook or Google’s data), and what they liked enough that they would share it with people their know (from Facebook’s data).