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Summary:

Google (GOOG) announced its OpenSocial strategy last week, starting with some of the smaller (albeit fast-growing) social networks, and quickly ensnaring MySpace (NWS), Bebo and a bunch of other companies to join its efforts. Nick O’Neill, the brilliant young man who writes the AllFacebook blog, described […]

Google (GOOG) announced its OpenSocial strategy last week, starting with some of the smaller (albeit fast-growing) social networks, and quickly ensnaring MySpace (NWS), Bebo and a bunch of other companies to join its efforts. Nick O’Neill, the brilliant young man who writes the AllFacebook blog, described it as a coalition of the willing.

On the surface, it seems like a laudable effort to create a common social platform in which widgets are written once for multiple platforms, allowing for the leverage of data across the web in a seamless manner. It’s being pitched as an open social graph. What it really is, however, is the first defensive move by Google, a company whose only strategy – until now — has been to stay on the offensive.

The Palo Alto, Calif.-based upstart has been upstaging Google and stealing its talent, a good enough reason to get any company steaming mad. Remember the public search feature Facebook launched — in hindsight it seems like a move to grab traffic from Google and boost its own user base. But that was penny ante stuff.

There is clearly no love lost between the two companies. The scorched earth strategy adopted by Google with OpenSocial reflects the fact that Facebook threatens to run away with what may be a huge new market for social networking-oriented advertising and as such, doing what until now had been the unthinkable: putting a hand in Google’s till.

In the 12-odd years since Netscape launched the consumer browser and made the Internet part of our daily lives, the web has been all about public information. There has been an information explosion, and since 1997, Google has been making sense of all that public information, collating it — search is just the tool — and tacking ads right next to it. A friend described it best when he said, “Google took the entire Internet and indexed it with keywords instead of URLs.”

And then along comes Mark Zuckerberg with his fun little social network, Facebook. The network keeps growing and has millions of users. Most of them are college students, (looking to hook-up) and the information is kept private – only Facebook knows everything they are doing. Google’s spiders are rebuffed and sent away. Then Facebook announces a new strategy and millions rush into this private club, sharing their likes, dislikes and everything in between. And still, Google is kept out. It’s a scary proposition for a company whose very existence depends on open access to all information.

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This seemingly public yet private Internet starts to grow at an unprecedented rate. According to ComScore data, while Google saw its page views double in the 12 months ended Sept. 30, Facebook saw its traffic zoom five-fold (see data). This trend of hypergrowth for semi-public/private pageviews is going to continue, while the open web that Google is used to indexing is beginning to show signs of fatigue.

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The difference in the two companies’ web strategies — open vs. private — is going to be reflected in their diverse advertising strategies. Google tries to personalize ads based on the content of the pages you are viewing. Facebook, on the other hand, knows a lot more about us — who our friends are, what we like, what groups we belong to, and even when we like to use its service. So what can Facebook do with all that information?

It can develop and deliver highly contextual and personalized ads — the ultimate goal for Google. Unlike Facebook, where people gladly share their personal information mostly due to an illusion of privacy, Google has to give away web services for free in order to get the right data sets needed to deliver more focused advertising. (Venturebeat has some insights about the soon-to-be-announced Facebook advertising platform.)

Nevertheless, Facebook has a lot to prove — anecdotal evidence suggests pretty dismal returns on advertising thus far — and needs to deliver an advertising platform that is exponentially better than Google’s keyword-based systems. When given the option of a more effective advertising channel, online advertisers are happy to shift their loyalties.

That said, OpenSocial is a pretty clever idea, especially for Google. The Mountain View, Calif.-based search giant doesn’t need to own the No. 1 social network, or even operate a social network at all. All it has to do is give application providers a way to monetize their applications.

In other words, with OpenSocial Google has extended the life expectancy of its AdSense. It still remains to be seen if OpenSocial partners end up using Google’s advertising platform. In fact, a lot about OpenSocial remains unknown at this point, but one thing is clear: It’s giving Facebook a reason to pause and do a quick reality check.

This open vs. private battle is going to occupy the headlines for some time. In the meantime, wait for Facebook to make its next move.

  1. Alexander van Elsas Tuesday, November 6, 2007

    Om, interesting observations on the differences in apporaches. But honestly, I don’t think Facebook is going to be scaring Google. Facebook sits on value creation in their walled garden. It has 50Mln users, but relative to the Internet population it is still a small number. By increasing ad pressure on the private space of the Facebook user they will scare off users, more than they will provide them value. Interestingly enough, Google also works in a walled garden. Only it encloses the entire Internet, and now Google tries to extend it into mobile as well. Google doesn’t need to monetize within Social Networks as they can monetize outside and do a better job at it. They can spread their ads across multiple platforms and many more users. And they provide it at a more convenient time for the user (when he is actually searching for it). I’m not a big van of the main stream web 2.0 business model of free (ad-based) services. It forces everyone to monetize the network instead of thinking about creating user value and monetizing that. That is why Facebook doesn’t open up, it will endanger their advertisement revenues. With the “Google Everywhere” web operating system forming I don’t think Google has much to worry about. I think Facebook should make some bold moves (similar to Google)and look at the mobile space to create new revenue streams. When in doubt, follow the money!

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  2. Notice the initials for OpenSocial -> O/S.

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  3. Excellent piece Om. Google are obviously seeing Facebook are a big longterm threat.

    I’ve been wondering if the new Google OS for mobiles is part of this; Facebook will become massive via mobile.

    Perhaps this is a dual strategy of cutting off a potential future problem?

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  4. Great article Om, one correction though. The name of the brilliant young man who writes allfacebook.com is actually Nick O’Neill. It’s an excellent blog and I suggest anyone who is interested in facebook happenings checks it out. Thanks again!

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  5. OM – great digest thus far on the subject matter. Brief, but you hit all the significant points. I hope writeups like this bring some sanity back to the OpenSocial/FB discussion. You, Don Dodge (credit to Don for stepping up right away) are in a small bunch of people taking a sane view of these recent announcements – the rest of them have engaged in delusional ways – in an unsuccesful attempt to occupy mindshare.

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  6. Forgive me, but how is Facebook providing ads. In-house or MS?

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  7. I don’t think Google is afraid of Facebook in the same way they weren’t afraid of Youtube. The company’s strategy is to be a part of growth markets.

    With Youtube Google already had Google video and they were looking to own the video space so they won the bidding war.

    Similarly, with social networks they have orkut, but that is meaningless is the social platform wars. So they create their own.

    In any growth market Google just wants a piece of the pie…

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  8. Have to say, excellent article Om — very well written, articulated with some very insightful points!

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  9. Rick,

    FB is currently providing ads via Microsoft. Those are mostly display ads. They were also selling something called flyers which are pretty lame and people have had a dismal response from them.

    But FB is expected to announce a new system today which will be their own ad-platform. I will update after i get more details.

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  10. Really nice article Om, though I’d disagree on one count. I think people on Facebook are much more aware these days about the privacy issue, but it seems more like they are willing to let that information get gathered in return for the amount of things they can do on Facebook, and the fact that all their friends are already on it too.

    Not that it majorly changes anything you wrote, but I think it’s interesting to note that many are aware of what’s going on (at least to a larger extent than before the ruckus about news feeds and everything) and are willing to let it happen.

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  11. Why Is Google Afraid of Facebook?

    On the surface, it seems like a laudable effort to create a common social platform in which widgets are written once for multiple platforms, allowing for the leverage of data across the web in a seamless manner.

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  12. I’m not sure that I agree that this is the first example of Google on the defensive. See the Open Handset Alliance, which reeks of anti-iPhone, perhaps just based on the online spin.

    Instead, I view this as Google’s new strategy – no longer ‘divide and conquer’ but now ‘crowd the space and eat up the entire competition.’

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  13. I think the real reason why Google is defensive is that Facebook is one of the few companies on the web that has been able to (thus far) not needed Google to grow. It doesn’t need AdSense to monetize. It doesn’t need or use Google search for its internal search needs. It does need Google web search for some amount of navigational web queries, but they get a ton of traffic by being the default web start page for a lot of their users. And, Facebook does not expose a lot of the data they collect to Google – it is, in essence (as you point out) a walled garden. And a fast growing one at that.

    If you were the dominant company on the Internet and you saw something growing at the rate at which Facebook is growing and they didn’t need or want your “help” to continue growing, why wouldn’t you be worried? You’d be crazy not to.

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  14. Google has no reason to be scared of Facebook!

    First, I think your assertions are false:

    “Remember the public search feature Facebook launched — in hindsight it seems like a move to grab traffic from Google and boost its own user base. But that was penny ante stuff.”-At best this would be a move to grab people search traffic from GOOG and nothing more. FB does not serve results on the indexed web. Google in no way fears FB taking traffic from them. Microsoft, a multi-billion dollar company with deep web search products continues to lose market share to YHOO and GOOG.

    Second, your own argument turns on its head:
    “……since 1997, Google has been making sense of all that public information, collating it — search is just the tool — and tacking ads right next to it.” What you miss here is that Google has not only been making sense of all that public information, they have been making sense of the needs, wants, desires and intentions of those individuals searching that public information (currently, 70% of the world’s 1.3B internet users use Google for search). In John Battelle’s words, they have collected the world’s largest database of intentions. They know everything that FB users have told FB, and more importantly, they know everything about FB users that they HAVEN’T told FB, or their friends for that matter. Google knows details about users that users don’t want their friends and family to know (via the funky fetish terms we search on, for example).

    Do you really think marking a check box that I like biking gives more information than:
    -the number of times over ten years I have searched on types of bikes, places to bike, research for various biking parts, etc
    -the frequency, time and place at which I have emailed my biking buddies to set up a ride
    -the google spreadsheets that gives deep information on how far we bike, average heart rate, etc.
    FB could not add enough check boxes to gather even a fraction of the demographic information that Google has collected on users

    GOOG has 90m plus users on gmail, all of who have a contact list. GOOG knows your best friends b/c they are the people you email the most.

    GOOG has invested roughly $10b in capital to create a proprietary hardware/software infrastructure that rivals even the Federal Government’s computational power. They have over 15,000 employees worldwide compared to FB’s 300. They actually have revenue, LOTS of revenue.

    I predict FB won’t even make it public, just like all the rest of the has-been social networks.

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  15. I am sorry but google is not afraid of FB. Come on, slow news day?

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  16. I think what concerns google is the loss of developers who end up at fb for the stock options. Maybe that is too simple but brain drain will hurt any company let alone the big goo.

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  17. What does this mean: “Google took the entire Internet and indexed it with keywords instead of URLs”?

    Indexing is normally a matter of pointing (or “mapping”) from one set of data to another set of data. I have no idea what the sentence above portends to convey.

    Apart from that, what happens when I use Google.COM to search for “amazon”? What happens when I search for “books”? Is there a difference between “barnesandnoble.com”, “bn.com” and/or “books.com”? What is it? Is amazon a keyword? Or a brand name? What’s the difference?

    I really hope someone can explain this to me.

    Thanks!

    :) nmw

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  18. Goog = 2007e revs 16.5b up 60% y/y
    goog stock up 60% y/y and has a public market for liquidity

    FB = 150m e 2007 revs, 75m = scare $ from MSFT ad deal
    FB=15b valuation = developers get worthless stock till FB actually has meaningful revs

    goog public @ roughly 22b mrkt cap & $3.2b in revs 2004 when they went public

    bottom line, go to FB and wait till 2010 for any value-IF they can grow revs to ~2b between now and then.

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  19. Facebook 2007 = AOL 2000. Closed has never and will never beat open. Thus is it written.

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  20. Kid who lives in the basement Tuesday, November 6, 2007

    “…while Google saw its page views double in the 12 months ended Sept. 30, Facebook saw its traffic zoom five-fold…”

    As long as we’re using this metrics, I’d like to note that traffic to my page, dedicated Life Action Role Playing, grew 20-fold in the same period, since I told 20 of my friends to visit it.

    I, too, can feel Google breathing on my neck, as I scale up my operations.

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  21. [...] Om Malik asks why Google afraid of Facebook. Uhm Hello, better sweater [...]

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  22. You’re giving Facebook way too much credit here, they’re but a tiny ant compared to the elephant known as Google.

    Facebook has done nothing but prove there’s a market worth Google’s time, it’s not a huge market (no walled garden is compared to the net itself), but with the right prodding to make it public and open, it could be.

    Google getting into the game isn’t a defensive action, it’s just the logical move. Facebook had better fear Google, they have the talent and deep pockets that can sink any competitor and totally change the game any time they want.

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  23. I’m absolutely sure that Google is scared that people will leave orkut and move to Facebook and it seems to be slowly happening as well!! That may be good enough reason for Google to be scared of Facebook…

    Well written article!!

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  24. good analysis.

    a few other relevant notes:

    • google should be concerned because facebook has demonstrated a level of customer acquisition / virality that it has no capability to match currently. whether they can figured that out with OpenSocial & future iteration is a big issue.

    however,

    • facebook is trying to figure out monetization, and the typical state of a social network user is “browse” mode, not “targeted search” mode (usually more valuable). whether they can figure this out with Social Ads, and/or a future build / buy / partner strategy is a big question.

    regardless, competition is good and both companies are innovating. that’s great for both developers & consumers.

    here’s to more of the same in the future.

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  25. [...] Why Google (GOOG) is afraid of Facebook. (GigaOM.com) [...]

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  26. [...] of this tremendous popularity that Facebook has garnered, Google has answered with its OpenSocial strategy of networking.  This method of networking creates a common social platform where users [...]

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  27. [...] success of Facebook opening up API development to third parties, and let’s face it, there is little love between Google and Facebook. OpenSocial represents Google’s Trojan Horse into the private [...]

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  28. [...] I was reading Om Malik’s blog GigaOm today, in particular his post titled "Why is Google Afraid of Facebook?" [...]

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  29. Google may not be afraid of FB. But they have to worry about MS.

    And MS made a smart investment of 240 million to flatten and open up ALL social networks. Nothing stops MS from supporting or even adopting OpenSocial – which is at the moment a “widget organizer”.

    That was much smarter than buying Facebook outright for 10-15B! That would have been a waste of money!

    Remember MS paid 300M for small acquistions like TellMe.

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  30. As this article (http://beta.resourcepad.com/storys/Fights_in_the_Playground_Facebook_vs_The_Rest_of_the_World/77 ) points out, Google’s going for just more than a piece of the pie, they’re actually going as far as to alienate Facebook from the partnership. MySpace? Not exactly the coolest thing to do, but a great way to send out the message loud and clear.

    • Tom
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  31. Time to have a Google Web2.0 browser:
    That has ability to social bookmark, RSS reader, integration with facebook and contacts, docs, emails, etc . Bookmarking using delicious etc and reading blogs with google reader etc leads to my multiple registrations/maintenance at different sites. Also

    Also I use Avantbrowser (since that provides ability to save and open multiple tabs at once), and that does not have google toolbar. you can try this at http://www.avantbrowser.com

    http://people20.blogspot.com/2007/11/need-web20-browser.html

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  32. [...] Malik of GigaOM writes about Google being afraid of Facebook. It’s about Google launching OpenSocial, something to compete with Facebook in the Social Web [...]

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  33. [...] representing about 13% of the total ad-spend – what you get is a pretty decent context for the ongoing battle between Google (GOOG), Microsoft (MSFT), Yahoo (YHOO), phone & cable companies, wireless carriers, Facebook, [...]

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  34. “…while Google saw its page views double in the 12 months ended Sept. 30, Facebook saw its traffic zoom five-fold (see data).”

    The 3-D graphic might be snazzy but just sucks at illuminating the above point. A casual glance indicates that Google seems to have had most of the growth. It’s a good article but needs to get back to Tufte’ian basics when it comes to using graphs.

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  35. [...] about 13 percent of the total ad-spend — what you get is a pretty decent context for the ongoing battle amongst Google (GOOG), Microsoft (MSFT), Yahoo (YHOO), phone & cable companies, wireless carriers, Facebook, [...]

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  36. [...] Google-Facebook: Open vs. Closed – GigaOm’s Om Malik considers the implications of Google’s OpenSocial platform, comparing the search giant’s approach to social networking to that of Facebook. Malik points out that Google’s entire business model depends on information being public–search is just a tool used to glean more information about us so the company can serve more targeted advertising. The idea behind OpenSocial is more of the same: provide free tools for (developers in this case) to create free, open software and then help developers monetize their programs through AdSense. Therefore, Google doesn’t really have to get into the social networking game.                     [...]

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  37. [...] Malik of GigaOM writes about Google being afraid of Facebook. It’s about Google launching OpenSocial, something to compete with Facebook in the Social Web [...]

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  38. [...] signing partnerships with the likes of Skype and AOL, and expanding into new avenues such as OpenSocial and, more recently, “quarterlife”. As a result, its traffic –despite stiff competition [...]

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  39. [...] by Om Malik Thursday, November 29, 2007 at 4:15 PM PT Comments (0) So a lot has been made of the Facebook vs. Google fight, whether it be the fight over talent or potential advertising revenues. The reality is that if [...]

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  40. [...] a lot has been made of the Facebook vs. Google fight, whether it be the fight over talent or potential advertising revenues. The reality is that if [...]

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  41. [...] from other companies in the Valley, namely Google itself. But what happened to search? It has been relegated to be the “old web” as GigaOm puts it. Even though search is not as hot as it once was (uh, 6 months ago?), it continues to command an [...]

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  42. [...] areas of major push – and if that meant taking on the telcos, the FCC, Microsoft, Wikipedia and even Facebook, so be it. And along the way it is estimated to add $1.7 billion to its $10 billion or so sales in [...]

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  43. Interesting article, but their is really no relevance in regards to search portal Google feeling threatened.If anything it is flattering on their side and free akilades. Google is many years ahead of Facebook and not in one concentrated area. The reality, is that Facebook is a free AOL. AOL had the opportunity to catch the whole universe of online social networking and dropped the ball by charging people for their services. This is the problem Facebook is having in trying to make a profit. They primarily have more invesment than a profit. Reminds me of that online food shopping company that went public after all the hype. Facebook has to think of something fast in regards to going public, Its going to be tough to convince investors to buy in a stock of social networking.

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  44. [...] 11/6/07 (1:55am PT), after a weekend to take a deep breath (or three), Om Malik wrote how this is the first “defensive move” by a company (Google) who has shown a propensity [...]

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  45. [...] become the most-trafficked social network in the world–actually competing with Google search itself for total page views, and recently surpassed 100,000,000 simultaneous [...]

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  46. [...] como el famoso Gfail, la falta de visión en inversión, como haber dejado de lado a Twitter, la competencia lenta, pero creciente y constante de Microsoft y Facebook: Why Could Google Die… View more presentations from Ouriel [...]

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  47. When Facebook offers a state of the art search engine, a version of OpenOffice, maps, news aggregator, rss reader, email, finance, shopping, etc, etc, THEN maybe Google can worry. Until then, I don’t see what the “competition” is.
    I guess I’ll put it this way. Which one would cause a serious blow to the world if they went away, resulting in loss of productivity?
    Let’s say you take the ad revenue as the “competition”. They aren’t mutually exclusive. It’s not like people are going to Facebook instead of Google. Maybe the article should focus on actual competitors. Like Google/Bing/Yahoo and Facebook/Myspace/Hi5

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