The Wall Street Journal is reporting that Facebook will soon embark on a new strategy that will see outside companies being allowed to set-up-shop on the social network so that they can leverage "Facebook users' networks of online friends". Facebook already has a public API (although Marc Canter and others say it's too limiting) which allows third parties to build functionality on top of the site. However, this new announcement seems to go a step further, positioning Facebook as a platform (which paidContent rather optimistically calls "open").
For instance, an online retailer could build a service in Facebook to let people recommend music or books to their friends, based on the relationships they've already established on the site. Or a media company could let groups of users share news articles with each other on a page inside Facebook.
In Tim O'Reilly's influential web 2.0 manifesto he talks about how companies can profit from user data, and we can see this in play with social networks like Facebook:
The race is on to own certain classes of core data: location, identity, calendaring of public events, product identifiers and namespaces. In many cases, where there is significant cost to create the data, there may be an opportunity for an Intel Inside style play, with a single source for the data. In others, the winner will be the company that first reaches critical mass via user aggregation, and turns that aggregated data into a system service.
This is exactly what Facebook seems to be aiming for, offering others access to their aggregated user data -- though under what terms and conditions or commercial arrangements isn't yet known.
More from the WSJ:
It's unclear how exactly Facebook plans to make money from the platform strategy, but one person familiar with the matter says the firm currently has no plans to share revenue with the companies that develop services to run on Facebook's platform. In that case, the main draw for companies that put their services on the site would be visibility and access to users of the Facebook site.
If Facebook isn't going to share revenue with those that build out their own services within the site, then will visibility be enough? That of course depends on whether doing so drives traffic back to the third party's own site. Which, from Facebook's point of view, would seem to defeat the point.
According to the WSJ we should get the official word as early as Thursday.
Many of the issues above are similar to the ongoing widget debacle surrounding MySpace, where there is a tension between third party widget operators utilizing the social network's eco-system and MySpace's terms and conditions, as well as its strategy of building or acquiring in-house competitors to those third parties.
If Facebook can find the right balance and truly embrace outside services in a way that profits all parties, then this could add significant value for its users through the addition of new and innovative services -- and further position the social network as a very different proposition to MySpace.
Mark Zuckerberg is quoted from an earlier interview:
"We realize that we're not going to be able to build everything ourselves here, and it's not the most efficient thing for us to do that." He added that letting others build services to interact with Facebook is "definitely going to be a bigger part of our strategy."
Related post: Beware the MySpace eco-system