Editor's note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of recently funded just.me. He was a co-founder of TechCrunch.
It is either a good week to be having a CrunchUp focusing on the faltering Facebook ecosystem or it is a terrible week. Either way it is a compelling and interesting week, and whether it is good or bad depends on who you are and what your role is in the ecosystem.
Following the departure of Ethan Beard (director of platform partnerships); Katie Mitic (platform marketing director) and Jonathan Matus (mobile platform marketing manager) this week; and the revelations from an embittered and chastened Dalton Caldwell, it seems to me that the tide is turning against Facebook as a reliable partner for developers to depend upon.
In the very same week, Twitter has stirred up its developer ecosystem to fear that its latest moves are both self-serving and destined to punish their loyalty. One consequence of this has been the departure of Mike McCue from its Board of Directors. Google meanwhile is rumored to have stopped hires and acqui-hires related to its G+ ecosystem, which already has poor support for third party developers.
There are common themes underlying the three major players struggles with how to grow revenue, particularly mobile revenue, while their web traffic is declining as a percentage of the total. They are all in a life or death fight, both with each other, but more importantly with the emerging mobile ecosystem, largely dominated by Apple. None of the three has yet successfully understood how to make money from mobile, despite — in all cases — reaching a point where mobile users outnumber desktop-only users and where the growth of mobile significantly outpaces that from desktop and laptop machines.
In addition — especially for Facebook and Twitter — the drive to grow revenue in order to justify gigantic valuations overwhelms a natural desire to serve the needs of developers and users alike. In stream ads (Twitter); sponsored stories (Facebook) are both examples of flawed revenue strategies that directly conflict with a good user experience.
There are a few possible explanations for what is happening.
One is that both Twitter and Facebook have abandoned product-focused development in favor of revenue-focused development. Hunter Walk argues this convincingly in the case of Twitter in his widely-quoted piece this week.
A second explanation is that there is simply too much power being given to non-product teams and that this has lead to confusion at both companies, nobody knows whether the product team is the tail and the revenue team is the dog, or the other way around. But that no clear strategy exists is obvious. Product and user focused thinking is in decline, it is akin to having chopped off the head of a chicken only to see it running around aimlessly, devoid of a brain.
A third is that both companies are slowly and patiently building a more mobile-centric, revenue focused, version of themselves (include Google here too) and that version 2.0 of their ecosystems will differ significantly from version 1.0. This will impact both users and developers but will ultimately make them relevant to the future. Developers will – like the companies themselves – have to adapt or die.
It is likely that there is some truth in all three of these points of view. It is also true that there is enormous danger in the transition they are all being forced to go through. Death is not to be ruled out. But it is also true that a failure to do anything, to rely on the old web-based, web 2.0 infrastructure and ecosystem, would inevitably lead to failure and irrelevance as new mobile-centric ecosystems emerge.
Based on this there are some things we know about Facebook, Twitter and G+.
What we know about Facebook
- The Facebook open graph "connect" ecosystem is largely irrelevant to its future mobile impact. As users replace usage of the web with a mobile, app-centric ecosystem, the phone becomes the center of gravity. In this mobile world Facebook is just one app on the phone. It has to focus on being integrated into the ecosystem of others (Apple and Google) rather than integrating others into its ecosystem. Few developers will need or want to exclusively rely on Facebook for access to the centralized social graph in this new mobile world. It will be really interesting to see what Peter Deng and Mike Shroepfler have to say about the impact of mobile on their ecosystem at the Crunchup. They may not agree with me.
- Facebook's recent launch of its Messenger and Camera apps face a challenge insofar as Apple's IOS already has a Camera and iMessage app, utilizing the phones address book for the social graph. How can Facebook become a meaningful part of Apple's IOS and Google's Android ecosystem? Does Facebook have to make a phone, even if it doesn't want to and sees doing so as non-optimal? Another way to say the same thing, does Apple's integration represent an opportunity or a threat to Facebook?
- Sponsored stories are not a great way to monetize mobile traffic. The phone is way more of a publishing tool than a reading tool. The attention users pay to the streams on mobile is far less than on the desktop. And any "noise" in the news feed or the timeline will make the streams far less compelling to the average user. New mobile ad formats are clearly needed. Stream based stories may not be the best way to think about what these formats should be. Facebook's utility to advertisers rests on its ability to engage users. The early formats threaten the opposite.
What we know about Twitter
- Twitter is big, growing and increasingly a mobile platform.
- The trend has been clear for some time — to include media and metadata in Tweets, and to attempt to make the center of gravity for reading and publishing Tweets be a Twitter owned environment.
- Adding ads into the stream has evolved as the primary form of revenue generation. Initially through awkward formats like "promoted tweets". The new Cards based platform promises to make in-stream ads both more visual and more seamless. But it also threatens to put users second to advertisers in product development decisions. "Developers beware" has been true for some time. It is truer this week than ever before.
- Despite these developments Twitter is still a small company compared to its $8 billion valuation and its ability to grow into that value is entirely related to its ability to draw engaged users to its mobile apps and facilitate those users to have some kind of relationship to its advertisers. It seems a long way from this today and developer complaints are unlikely to deter it from experimenting and trying to deliver against those goals.
What we know about Google+
- Google is under pressure, but it is under less pressure than Facebook and Twitter to monetize mobile. This is due to its enormous revenue from search on the desktop subsidizing its mobile future for the time being. Having said that, analysts are starting to express concerns about the sheer size of mobile, and its rate of growth impacting Googles "cost per click" metrics negatively. Google does not have forever….
- G+ is an impressive platform but it is not yet a consumer platform, despite the numbers of absolute users. It isn't clear that the recent changes to the mobile app will be enough to change that, beautiful though it is.
- G+ has a limited read-only API that means developers cannot treat it as a platform in the way they can treat Facebook and to a lesser extent Twitter.
- Compared to its rich ecosystem for developers on the desktop, mobile is a weak ecosystem for Google developers.
- Android doesn't necessarily help Google. It is a double edged sword. It gives Google a way to be relevant on mobile, and so compete with Apple, but it drives increased mobile use. As it does that, the pressure to figure out mobile monetization will increase exponentially. Click to Call will not be sufficient. Admob will need to evolve if Google is to be successful, and the emergence of new mobile formats for advertising will be key.
Interestingly all of the above may represent an opportunity for Yahoo, under Marissa Mayer, to make a comeback. Yahoo really missed out on the decentralized world of web 2.0. It remained a centralized portal focused on content as the world moved to feeds, aggregation and syndication. Despite that it remained a very large, but restrained and under-monetized, property. In reinventing Yahoo, Meyer could do worse than try to figure out some of the new puzzles given birth by the growing app-centric mobile ecosystem.
The one positive thing that this week has so far thrown light on is that there is a widespread recognition that things cannot stay the same.
The Facebook of 2011, the Twitter of 2011 and the Google of 2011 are all understood to be in need of reinvention for a mobile-centric world with no clear strategy to make revenue.
Rome is burning, but the recognition of the need to dispense with it and build the new ecosystem is widespread.
In this new world Apple holds more aces than any other player. It has the largest ecosystem of devices, developers and revenues. It does not need advertising revenues, and it has a model that works for successful developers and itself alike. There are few if any disharmonies.
Google, with Android, could put itself in a similar position if it could truly abandon its web-centric past and focus on Android as its central ecosystem. This, unlikely as it seems, would make a lot of long term sense. Facebook, relegated to being an app provider on the platforms of others, along with Twitter, seem to be in the weakest position, and need to be boldest of all. Investor pressure should not detract from product needs as they seek to chart their future.
With developments this week, the three other players have all declared an intent to compete, even if it means destroying the ecosystems that have so far made them successful. Brave, bold and unpopular moves are always fraught with danger, and may indeed prove to be mistaken, But doing nothing isn't an option. Get your ticket for the CrunchUp if you want to understand more……
[Image via usu.edu]
Facebook is the world's largest social network, with over 845 million monthly active users. Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz, Chris Hughes, and Eduardo Saverin to help build Facebook, and within four months, Facebook added 30 more college networks. The original...
Twitter, founded by Jack Dorsey, Biz Stone, and Evan Williams in March 2006 (launched publicly in July 2006), is a social networking and micro-blogging service that allows users to post updates 140 characters long. Twitter "is a real-time information network that connects [users] to the latest stories, ideas, opinions, and news." The service can be accessed through a variety of methods, including Twitter's website; text messaging; instant messaging; and third-party desktop, mobile, and web applications. Twitter is currently available in...
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