25
May

Prediction: Facebook will be the largest social network in the world

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I saw history in the making today.

For some reason, I was lucky enough to be in San Francisco for the Facebook f8 Platform launch event. This announcement was at least an 8.0 on the Richter scale. It was a whopper.

In fact, I haven’t come away from an event so excited since September 21, 1995, after attending the Online Developers II conference, also in San Francisco, when it hit me that my CD ROM publishing days were ending, and that I would soon become an internet entrepreneur. In the next five years, our team quickly shifted from publishing to online, launched Ancestry.com and MyFamily.com, and then went on to raise $90 million, acquire Rootsweb (and later Family Tree Maker / Genealogy.com) starting what has since become the largest genealogy company in the world. (Note: I left the company in Feb 2002 and have recently started a competing firm, with two properties: WorldVitalRecords.com and FamilyLink.com)

For me, that journey all started at Online Developers II.

That story doesn’t necessarily have a happy ending for any of the company’s founders or even its early employees or investors. Like Ray Noorda used to say, “Finders Keepers, Founders Weepers.” Crossing The Chasm by Geoffrey Moore explains why pioneers (company founders and innovators) don’t often do well in the end, while settlers (who are usually better are operations) do. I’m actually fine with that, and reading that in Moore’s book was one of a dozen things that helped me move on emotionally.

Today felt just like September 1995 to me.

And it makes me wonder what the next 10 years might bring.

I sat on the third row and drank deeply of the kool-aid as Mark Zuckerberg, who turned 23 years old just 11 days ago, presented what may be the best business opportunity for internet entrepreneurs in the past ten years.

A huge new opportunity was presented to the few hundred people in the room, including 65 companies that have spent the last few weeks developing applications for the launch of Facebook Platform.

Facebook is inviting anyone to develop applications for their users on top of what Mark calls their “social graph”–the core of their service which basically keeps track of real people and their real connections to each other.

Facebook has 24 million active users (meaning they’ve used the site in the last 30 days–I like how they aren’t overstating numbers like SecondLife) and 50% of them login each day. Mark says the next most active social network is not more than 15%.

Last fall as I taught Internet Marketing at BYU we learned that a UCLA survey showed that 50% of college age females said Facebook was their #1 most important web site (even more than Google, Wikipedia, or anything else) and that 1/3 of college age males said it was their #1.

Look how many “addicts” Facebook has, according to Quantcast. 63% of visits are from addicts. eBay is only 56%.

Facebook is adding 100,000 new users per day. That’s 3% growth per month. And the fastest growing segment is over age 25. At this rate, they’ll have 50 million users by the end of this year, and 75% of them will be out of college. I read just on paidcontent.org that Facebook is the fastest growing social network in the UK, and today Mark said that 10% of Canada’s population is using it.

With 40 billion pages view per month, Facebook has passed eBay in page views, and is now in 6th place, just behind Google.

So this is no small thing for a 3 year old web site. Facebook is absolutely for real. I like Facebook a lot; while I can’t stand MySpace. Facebook is clean and nicely designed and architected. MySpace in my opinion is messy and mostly full of garbage. Facebook is a real social network for real people. And it is really, really popular.

And it’s growth will be dramatically accelerated by the Platform announcement. If Facebook is adding 100,000 new users per day with its own few simple applications (like its photo sharing, a very simple service that has given Facebook twice as many photos as all other photo sharing sites combined), what will happen when thousands or tens of thousands of developers start building apps in Facebook and marketing them to more users?

Facebook will reach 50 million, then 100 million, then 200 million users, and beyond.

Rather than continue to try to develop features within its own proprietary, closed network, basically keeping all of its users to itself (and kicking out widgets they don’t like, like MySpace does), Facebook intuitively gets the concepts that are so brilliantly discussed in Wikinomics (which are so non-intuitive to old school business types), and has chosen to open up its network for all to participate in. Because they embrace the winning philosophy, they will win.

Application developers can now have access to core Facebook features, such as user profiles and user connections, and even publishing to the News Feed, all with the control and permission of Facebook users. So if a Facebook user chooses your app, it will show up on their profile for all their friends to see, and they can enable that app with a single click, and so your application can spread virally to the 24 million other users.

When Facebook has 100 million users, in the not too distant future, having the ability to develop an App in their system will almost be like being able to get a link on Google’s own home page.

Can you imagine Google ever doing that? No way. They have too much at stake. Their $147 billion market cap couldn’t take it. Google’s philosophy was to not be evil. But I think Facebook’s philosophy is a decade fresher and even more in line with where things need to go than even Google–a company that I admire more than any other.

When Clayton Christenson spoke at the first Open Source Business Conference (again in San Francisco) about three years ago, he spoke about how the LAMP stack has provided a powerful low-cost platform for companies to develop applications on top of. Linux, Apache, MySQL, and PHP enable companies to develop applications that used to cost millions, but by building on top of all these projects, companies could move “up the stack” and focus on providing unique value that wasn’t in the stack already.

There are more and more free layers being added to the stack all the time, powerful services that can be embedded in your own new applications, like Skype, Maps from Google or Microsoft, storage and utility computing from Amazon, and video layers like YouTube and Google Video.

When anyone develops an application on top of the LAMP stack, like a CRM system for example, they always risk being disrupted by someone who provides that for free on top of the already existing stack.

Any new open source application or creative commons layer can be added to the stack, which might commoditize that application and put some companies out of business, but then that enables everyone else to again add more value on top of the stack.

This process continues, and all the while the consumer benefits greatly, and developers can continue developing innovative and valuable services on top of the ever-growing application stack.

The way I view the Facebook Platform announcement is this: the LAMP stack has just been extended by the huge and growing “social graph” that Facebook is opening up to the world. (It’s not completely open, because you have to develop apps within Facebook, but it’s a start in the right direction.)

Now, instead of application developers having to each build their own web site and try to get people to find it and use it and share it, the viral marketing of any good application site will come right from the Facebook interface itself. As users adopt new apps, they will spread quickly through the network.

Mark made three big announcements. 1) Applications can be deeply integrated with Facebook 2) Distribution of the applications will occur through the network, and 3) The business opportunity Facebook is providing will give 100% of advertising revenue (for third party applications) and 100% of transaction revenue to the application developers.

Now that is the true spirit of Wikinomics.

VPs from Microsoft and Amazon were present to express their support for the Facebook Platform. Microsoft will enable application develop with Silverlight and Popfly, and Amazon discussed how its web services enable Facebook Platform apps.

The CEO of Slide mentioned that the Platform developer wins big, but that applications developers also have a huge business opportunity here.

Microsoft’s market cap is $280 billion. But the top three application developers on Microsoft’s platform have a combined market cap of $40 billion.

I don’t think Facebook’s market cap vs it’s application developers will be nearly that lopsided. In fact, the way they are treating their own applications versus Platform applications makes it a pretty level playing field. Facebook users can deselect apps they don’t want to use–even Facebook’s own apps–and sign up to any other.

The core asset Facebook wants to own, extend, and leverage, is the social graph–who is connected to whom.

It is even possible that some future Facebook app developers could end up with a greater market cap than Facebook–if they permanently maintain the 100% of revenue going to the partner model. For example, a MMORP game built into Facebook might someday have 10 million users paying $10 per month, or $1 billion in revenue, when Facebook might at that point have $500 million in advertising revenue. (Reportedly it will make $150 million this year.)

Okay, not likely, but maybe possible.

The cool thing is that the marketing costs for these application developers will be basically nothing. All viral. All courtesy of Facebook’s users.

One of the self-serving reasons why companies like Google and Amazon create so many APIs and web services is to get a vast community of developers doing R&D for them and prototyping applications to see what works best. Then, they acquire the ones the like best.

Facebook will certainly be in a strong position, once it has a liquid currency, to acquire some of the most interesting application developers using its Platform.

If you haven’t read it recently, read Chapter 7 of Wikinomics, “Platforms for Participation” in the context of today’s announcement.

Here are a couple quotes.

“The winners in this evolution will be companies that can create the most comprehensive incentive frameworks to adequately reward all stakeholders.” (p. 207)

How about letting them keep 100% of their ad and transaction revenue? That’s quite an incentive.

“Winning in a world of cocreation and combinatorial innovation is all about building a loyal base of innovators that make your ecosystem stronger.” (p. 210)

Like I said at the beginning, I felt very lucky to be invited to this event. I got the invitation because we invested in YackPack last year, which is one of the companies that is launching its application within Facebook.

I didn’t see anyone else from Utah there, partly because every internet entrepreneur and marketer in the state was probably attending Seth Godin’s speech in Salt Lake City, which was probably very good.

If you are from Utah and went to the Facebook f8 event, please comment here or email me. I really want to connect. I think we need a Facebook Platform Developer Community here in Utah.

I searched LinkedIn tonight and found 140 Facebook employees, board members, etc, on LinkedIn. I’m 2 degrees away from many of them. But then I searched for “facebook api” to see how many people in my 2 million + network have any experience developing for Facebook and only 1 person came up.

Hopefully there will be some developer forums that emerge quickly so that more people can get guidance on how to proceed.

So here is my final thought. I’ve been pretty fortunate in my career to kind of see the big waves and trends coming and to get positioned to take advantage of them. I think I have pretty good instincts, because my brother Curt taught me to read everything (and he buys me new books from Amazon almost every month) and to go to conferences all the time. I already mentioned the transition from CD ROM publisher to Internet Publisher. After reading Net.Gain in 1998, we created Ancestry.com’s user generated content strategy (it became our most popular database) and launched MyFamily.com which was really an early social network for families. At our peak we were adding 20-30,000 new users per day. Unfortunately, our investors stopped supporting that free site because it wasn’t making money. Doh.

After reading an article in Industry Standard in 1998, I decided to attend the first ever affiliate summit held in New York City, where Commission Junction, Be Free, and LinkShare all presented. We chose Be Free, launched our affiliate program, and over the next few years, affiliate marketing was our #1 source of new customers at Ancestry.com.

In the last few years, I blogged before Google’s IPO that it would disrupt Microsoft by offering free software (including Office apps) and said it will one day pass Microsoft in market cap. And, more recently, in my latest example of prescience, I blogged about Lindsay Campbell of Wallstrip after her first day as anchor, and suggested that she might one day rank up there with Soledad O’Brian and Diana Sawyer, and now CBS paid $5 million for Wallstrip, and Lindsay’s career will soar. Way to go, Lindsay!

The only reason I’m reciting these past predictions is to try to lend a little weight to my next prediction: that Facebook will become the #1 social network worldwide (and the first to get 1 billion users–I love Facebook mobile, by the way) and that thousands of entrepreneurs will become extremely successful by developing to this new platform.

I hope that Facebook won’t be acquired. I hope it will go public and become the next major Internet company along with Google, Yahoo, Amazon and eBay. Another hugely profitable company that can potentially acquire lots of other great smaller companies.

I like Mark Zuckerberg a lot. I met him tonight as he was just visiting with lots of the individual companies supporting the launch event, and thanking them for their support. He was very genuine. I can see him in 10 years with the influence of the Google founders and in 20 years with the influence of Bill Gates. He is just getting started. At the recent Startup School, he advised startups to hire coders — even in the marketing department — and he talked about time he spends thinking about philosophies and how at this young age his life is not cluttered with things and family responsibilities.

Can you imagine in a couple years when Facebook has 200 million users worldwide, with half of them logging in every day, and a 25 year old will be CEO of this company? I can’t think of a parallel in world history where someone this young had this much influence. Oh wait. Alexander the Great.

Ok. I’ll stop now. It’s 2:40 am. And my post is going on and on and on, and all over the place.

But I’m serious about this Facebook Platform. Check it out. Mark’s philosophy of openness is an open invitation to co-create something remarkable with him and his 24 million users.

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79 Responses

    1. Useful links for 2007-05-28 | Gino Cosme

      […] Facebook will be the largest social network in the world – “I saw history in the making today. â

  1. Wow Paul,

    I haven’t seen you this worked up since…well, ever!

    Thanks for this thorough and insightful post.

    I do have one question though:

    How can the average business person leverage this information?

    I’m not a developer, or a coder. In fact, I’m not even a Facebook user (yet). So what should a marketing guy like me be doing with this information?

  2. Superb write up Paul – thanks for this.

    I’ve just moved over to the local area from Redmond (to join Orem-based Bungee Labs), so I’d interested in meeting up one day. Let me know.

    Alex.

  3. My head’s spinning and I’m not sure where to start, but since I’ve got Wikinomics on the shelf, I suppose I’ll start there. And I should log into Facebook and look around. Thanks for the insightful post. I suppose that we’ll see FamilyLink migrating to the Facebook platform in the very near future…

  4. Paul, I agree with you completely. I was lucky to have been an early user of Facebook a few years ago and even back then I could see that it would become extremely popular. Their interface was a lot cleaner and the users seemed a bit more sophisticated than over at MySpace, and they have added a lot of cool new features over the years. All my friends who were hesitant to join back then are now avid users. I think Facebook has a lot of potential for Marketers because it allows a message to easily be spread virally. Just like Google made a fortune through advertisers leveraging their technology to find highly targeted prospect I think Facebook will make a fortune because they have created a platform that allows advertisers to tap into people’s social networks. This is so powerful because people trust what their friends say probably more than anyone else.

  5. Myspace – the next Prodigy?…

    Over the last year, there’s been a tremendous amount of focus on the “Widget economy”. Newsweek has even dubbed 2007 as the “Year of the Widget.” While the concept of a “widget” might seem trivial to many outside of Silicon…

  6. […] Just last week, Facebook took advantage of that opportunity in  a huge way.  Specifically, Facebook announced their new development platform, F8.  I won’t spend a lot of time describing their announcement (I’ll leave that to others), but I agree with Paul Allen’s summary of the three key points: […]

  7. […] A recent ZDNet post suggests that, in less than 10 years, Facebook and its founder Mark Zuckerberg could be as influential as Google. Not only will it be “the largest social network in the world,” but it will have so much information on you and yours that its value will be unthinkable. […]

  8. […] The big tech news of the week is all about Facebook announcing that they are opening their platform up for other companies to leverage and monetize.  Some are predicting that Facebook will soon be the biggest social network in the world and will rival Google and Microsoft in terms of importance.  Whether that is true or not isn’t as important as the fact that our clients are soon going to be looking at these social networks as a means to capture leads and an important part of their online strategy.  I believe OnBoard needs to take a hard look at the types of widgets we might be able to offer our clients to tie into these networks.  This is a huge opportunity for OnBoard to provide leadership to our industry. With that in mind the lunch and learn this week will be about Facebook, social networks, and widgets. […]

  9. […] I am on Facebook As Facebook has just been predicted as the largest social network on Internet, I think it would be a good time dusting off my Facebook account and check out what the hype is all about. […]

  10. Steven

    Can you imagine Google doing that? It’s called IGoogle, look how many third party widgets they link from that page.

  11. Paul, I have to say I agree with pretty much everything you said. The moment I heard the news about this I knew it was going to change everything. I haven’t been this excited about the web in a long time.

    BTW – I grew up in Orem/Provo and come back to visit family and ski often. I even recognize some of the people who left comments on this post. I’d love to meetup next time I’m back.

    Cheers 🙂

  12. James W.

    Facebook the largest social network in the world? Possibly, but we’ll see. I will certainly take Facebook seriously from now on though.

  13. […] Prediction: Facebook will be the largest social network in the world  —  I saw history in the making today.  —  For some reason, I was lucky enough to be in San Francisco for the Facebook f8 Platform launch event.  This announcement was at least an 8.0 on the Richter scale.  It was a whopper. Source:   Paul Allen: Internet Entrepreneur Author:   Paul Allen Link:   http://www.paulallen.net/2007/05/25/prediction… Techmeme permalink […]

  14. […] What comes after Facebook? The Human Network. Posted May 29, 2007 Social Networking provider Facebook has definitely garnered attention with its recent media announcement. Bloggers such as Paul Allen are predicting the day when Facebook will be the largest social network in the world. The Wall Street Journal ran a front page article on how members of Barack Obama’s campaign are using Facebook to raise funds and coordinate activities among supporters. Social networks, such as Facebook certainly have tremendous potential for providing platforms to facilitate coordination, communication, and other forms of collective activity, but if we’re really going to leverage collective activity, I think we need to look beyond the social network platform provider paradigm. […]

  15. We just recently added facebook login to our site, and will have the facebook app finished this week…

    Its a great platform, and leveraging the over 2k unique users we get to our site (almost all students) gives me high hopes for the potential there is for growth.

    I could use a few developer partners, as I am the sole owner/coder on the site, and with a full time job, its hard to do all that my mind comes up with. Holla if you are interested (php/mysql)

  16. […] Facebook shook up the Internet world 3 weeks ago when it announced the availability of Platform, enabling developers to build applications deeply integrated within Facebook, distribute applications through feeds and requests, and keep 100% of the advertising and transaction revenues generated. Lots of smart people have since been drinking the kool-aid. […]

  17. Paul, so interesting that you took away the same reaction I did. That this changes everything. We were one of those 65 companies that were part of the Facebook launch but we had no idea how comprehensive this was until Mark Z laid it out. You wrote about PicksPal earlier. Imagine dropping our sports picks kernel in to that social networking operating system. Allows Facebook to do what it does really well which is the social graph and allows us to focus on what we do best which is let folks make picks against each other. Exciting. Tom Jessiman, Founder, PicksPal.com

  18. Gina

    Paul
    I hope you think that there is still room for other social networks as well.

    Check out http://www.nexo.com, free and easy online groups. Nexo.com combines easy website creation, group emailing, social networking and real-time collaboration to improve group communication and effectiveness.

    Nexo.com is being used by groups of all types – work groups, families, sports teams, nonprofits, clubs, classes, event committees, interest groups and more.

    It is open to outside widgets, has fine-grained permissions for privacy and access control, is real-time (no need to hit re-fresh) and is very easy to use.

  19. […] If you don’t know me, share a comment or drop me an email and get to know me! If you want to find me on facebook, then try searching for my name. There’s already a good sized network of SEOs on there (not as big as LinkedIn from what I can tell), and I’ve found some students I taught in a class before. Facebook has put themselves in a great position for being a huge leader in the social network world with their new API. […]

  20. […] Oh, echt? Wordt het leuker voor bedrijven die op dit moment nog leven van de exploitatie van intellectual property (IP)? Voor organisaties die gesloten zijn en maar niet inzien dat het gros van de oude businessmodellen binnen een paar jaar volledig waardeloos is? Voor mensen die totaal niet snappen dat zogenaamde ‘digital natives’ nooit meer zullen betalen voor het downloaden van muziek (en informatie in zijn algemeenheid)? Die open content niet weten te waarderen binnen nieuwe businessmodellen? Die nieuwe sociale ontwikkelingen afdoen als gimmick, die bij gebrek aan goede businessmodellen natuurlijk niet kán werken (hallo, DAT DOET HET AL!). […]

  21. […] “Last fall as I taught Internet Marketing at BYU we learned that a UCLA survey showed that 50% of college age females said Facebook was their #1 most important web site (even more than Google, Wikipedia, or anything else) and that 1/3 of college age males said it was their #1″ – Paul Allen, in his post: Prediction: Facebook will be the largest social network in the world. […]

  22. I read something about how Facebook and MySpace are becoming socially separated; Facebook is mainly white-collar, college-educated people, and MySpace is more blue-collar, non-college people. That being said, I agree that Facebook looks a ton better than MySpace.

  23. Geertmania » Blog Archive » Facebook

    […] Hmmmmmm…… Paul Allen over Facebook. De omvang en verwachte groei van die site was nieuws voor mij. Facebook gaat klaarblijkelijk zijn infrastructuur volledig opengooien voor 3rd application developers die daarmee direct toegang hebben tot een enorme userbase. In elk geval goed om te lezen dat Microsoft de opportunities van Facebook ook ziet (PopFly en Silverlight kunnen gebruikt worden voor applicatieontwikkeling op Facebook) en erop probeert te kapitaliseren zonder het 1:1 na te bouwen. […]

  24. Chase Brammer

    Paul –

    I am working as a developer with your brother Curt over hear at Agilix, and I am an avid FB user (I am still in college) I visit it somewhere between 5-10 times a day and get email and SMS updates on my phone. I am already looking into what I can do with the new FaceBook API as my skill set in a perfect match for what they are offering. If you have any opportunities, I would like to know about them.

    Chase

  25. Howard Lindzon » Facebook’s Week

    […] I like Paul Allen’s deep take the best . Josh linked from his great post as well (MySpace the Next Prodigy?). […]

  26. mind new media » Blog Archive » Facebook, Myspac

    […] Just last week, Facebook took advantage of that opportunity in a huge way. Specifically, Facebook announced their new development platform, F8. I won’t spend a lot of time describing their announcement (I’ll leave that to others), but I agree with Paul Allen’s summary of the three key points: […]

  27. RR

    Great post.

    There is a forum to guide developers in working with the facebook platform at:
    http://facebooklobby.com/forum

    Also, there is a Northeast developers platform group in facebook for folks interested in meeting up and sharing experiences of working with the facebook platform and living in the Northeast US.

  28. Myspace - the next Prodigy? · Articles

    […] Just last week, Facebook took advantage of that opportunity in  a huge way.  Specifically, Facebook announced their new development platform, F8.  I won’t spend a lot of time describing their announcement (I’ll leave that to others), but I agree with Paul Allen’s summary of the three key points: […]

  29. Chris LaBossiere

    Wonderful post. I am a huge convert to the power of Facebook in shaping the sharing of information and transparency that will be paramount in the evolution of future generations.

  30. dre

    You are 100% correct, Facebook will certainly surpass Myspace within the next 24 months. The site is leaps and bounds more efficient for the end user and I have never experienced a crash using Facebook. The users seem to be more in tune with the entire online social community concept. Perhaps by birthing Facebook into a college setting they seem to have a more responsible clientle..a simple mans thoughts…

  31. Is Facebook Worth the Hype? : Forecast-Blog

    […] will reach 50 million, then 100 million, then 200 million users, and beyond.” – Paul Allen (who also compares Facebook founder Mark Zuckerberg to Alexander the […]

  32. Pure Web Applications - Blog » Blog Archive » Mu

    […] to all developers. They can make anything they want to be placed within your own homepage. This changed the game for Web 2.0 startups. It’s not hard to see what the wonderful business opportunity is here – […]

  33. Google Very Well Could Achieve Social Network Domination &ra

    […] Facebook is totally entrenched and many folks believe they will win the social networking race with their “Facebook platform” and associated widget-mania – I still think Google could […]

  34. Mark Mayhew

    great post, Facebook just hit the 50M user mark, and you seem pretty accurate in your predictions (except maybe for reducing marketing costs to zero; there are now over 6,000 apps developed, and some of them do need to be marketed).

  35. Geertmania » Facebook

    […] Hmmmmmm…… Paul Allen over Facebook. De omvang en verwachte groei van die site was nieuws voor mij. Facebook gaat klaarblijkelijk zijn infrastructuur volledig opengooien voor 3rd application developers die daarmee direct toegang hebben tot een enorme userbase. In elk geval goed om te lezen dat Microsoft de opportunities van Facebook ook ziet (PopFly en Silverlight kunnen gebruikt worden voor applicatieontwikkeling op Facebook) en erop probeert te kapitaliseren zonder het 1:1 na te bouwen. […]

  36. Talking Huntsville.com » Blog Archive » Is Googl

    […] latest Zuckerberg worship, courtesy of Paul Allen, in a love letter to Facebook, and Zuckerberg: “Facebook will be the largest social network in […]

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