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Summary:

In one fell swoop, Facebook has become the king of identity on the web. The company today signed an agreement that would integrate Facebook Connect across Yahoo and its various properties. Here is my analysis of the winners and losers in this very important deal.

In one fell swoop, Facebook has become the king of identity on the web. The company today signed an agreement that would integrate Facebook Connect across Yahoo. In early 2010, people using both Yahoo and Facebook will be able to share updates across both networks.

Here are some relevant bits from a Yahoo press release:

“With this integration, we are opening the door for two of the Internet’s largest online communities to make it easier for people to stay connected,” said Jim Stoneham, vice president of communities for Yahoo!. “It also enables us to further the Yaho! Open Strategy, which is aimed at making experiences dramatically more open, social and personally relevant for the more than 500 million people that visit Yahoo! each month.”

Yahoo!’s Facebook Connect integration will give consumers richer experiences on Yahoo!, including in Yahoo! Mail and on properties like Yahoo! News, Yahoo! Sports, and Yahoo! Finance. It will enable them to connect with Facebook friends on Yahoo!, view a feed of their friends’ related activity on Yahoo!, and share content—such as photos from Flickr or comments on news stories—with all of their friends on Facebook. The content that consumers share with Facebook friends will then create a loop that drives visitors back to Yahoo!.

This partnership extends the current Facebook integration on Yahoo! which enables Facebook users to access their stream and update their status from the Yahoo! homepage, provides “Share on Facebook” options across the Yahoo! network, and allows Facebook to access Yahoo! Contacts.

Here is my scorecard on this deal’s winners & losers.

Facebook-ed: Mark Zuckerberg can take rest of the year off, because he just had his dream come true. First he hits the 350 million subscriber-mark — no small feat. And then this deal with Yahoo. Facebook Connect is a simple way to use Facebook ID and connect to other non-Facebook web sites, and then if you want, send those interactions back to your Facebook page. For instance, if you logged into GigaOM and left a comment using Facebook Connect, you can tell your friends that you did so.

If more and more sites use Facebook Connect, that is use Facebook ID, the closer company gets to becoming the ultimate identity broker of the web, which in terms helps them achieve their ultimate goal — organize world’s relationships. In comparison, Google which wants to organize world’s information. In my essay from July 2008, Why Facebook Connect matters and why it will win, I wrote:

Why? Because this is their one chance of building a monetization engine. The company makes no bones about trying to build a platform that allows it to offer branded advertising in a manner akin to Google’s Adsense. A simpler person (like yours truly) would call this a platform that serves ads for all occasions, reasons and seasons.

As Facebook Connect gets embedded into many places, it sends more of our usage data back to the mothership, which in turn can take that data and build better algorithms to send us on blind dates, watch movies or buy sports tickers. This deal gives Facebook Connect the ultimate validation: It now works with one of the largest web sites on the planet. Zuckerberg must be feeling happy that he never sold his company to Yahoo back in the day! Winner.

Yaho-oh!: It’s clear that web identity is becoming a two-horse race: Google vs. Facebook. Back in the 1990s, Yahoo chose Google) as its search provider and helped turn them into a major competitor and ultimately their nemesis. Their deal is of similar importance, as it gives Facebook Connect a big boost. Yahoo, despite its claims, is going to become less relevant in the web identity sweepstakes. It is part of the company’s growing de-emphasis of its technological chops. They are giving away search to Microsoft and it seems they are happy to take a backseat in identity sweepstakes. I think the company in its desire to become a media-web destination is becoming technologically irrelevant. Loser.

Googly: I think the company that is the biggest loser in this deal is Google and its Google Profile and Friend Connect. The big boost to Facebook Connect over Google’s ID efforts is pretty obvious. But let’s look at the bigger implications of this deal that’s helping the Facebook brain (read my post from last year to understand what I mean by that) become smarter.

Since the Yahoo deal will yield more relevant user behavior data, Facebook can continue to get better at surfacing information using the social graph. The more Facebook does that, the less important it is for people to continue searching. If the Facebook brain brings you the stuff you’re likely to want (thanks to inputs from your friends), the more Facebook will keep you inside its system.

Google is nowhere close to delivering that experience. Remember, Marissa Mayer just introduced Google’s grand plans at the Web 2.0 conference in San Francisco this past October. It will be a while before Google can fully grasp the importance of the social web, something I outlined in my report for GigaOM Pro. (subscription required.)

AOL: AOL, by doing nothing ,can be a winner. Why? Because its own efforts aren’t going anywhere. By partnering with someone, AOL can again change the Web ID landscape. Possible Winner.

  1. This is Web Big – /status Wednesday, December 2, 2009

    [...] Yahoo and Facebook have signed an integration agreement: “With this integration, we are opening the door for two of the Internet’s largest online communities to make it easier for people to stay connected,” said Jim Stoneham, vice president of Communities for Yahoo!. “It also enables us to further the Yahoo! Open Strategy, which is aimed at making experiences dramatically more open, social and personally relevant for the more than 500 million people that visit Yahoo! each month.” [...]

  2. Good analysis (well, at least I agree with it).

    It looks like Yahoo! has made a series of decisions for short-term benefit that have crippled its long-term prospects.

    It is sad enough to see Yahoo! weakened. Seeing an unprincipled organization like Facebook become a critical public resource is even worse.

    1. Hey it is good to find one person who agrees with me :-)

      I agree with your assessment that Yahoo is making short sighted moves that make it ever more irrelevant.

  3. Facebook becomes the ultimate social aggregator with the eyeballs and data to deliver highly targeted ads (if users will pay attention to them).

    Yahoo continues its course of defining itself as a media property and less as a search and social network. They have an uphill struggle. The technology factor is greatly diminished as stated in this post.

    Google has never been a social network. They continue to be an search, advertising, and applications service. Technology is Google’s sweet spot and justifiably so.

    AOL faces a long battle against Yahoo and MSN and all the other media properties to attract users/viewers and advertisers.

    My thoughts.

  4. With roughly 300M monthly users, Yahoo Mail is equivalent in size to Facebook. Long before the rise of Facebook did Yahoo have the makings of the world’s largest social network – one based on email addresses. Unable to capitalize on this vast network to deliver a better advertising platform, they have signed an agreement to outsource this lucrative opportunity to Facebook.

    Ceding identity to Facebook accelerates Yahoo’s demise. Yahoo’s perennial core competency is selling branding advertising to a massive, unique audience viewing high quality content. By correlating a Yahoo ID to a Facebook ID, Yahoo more than cedes identity: they cede exclusive knowledge and access to hundreds of millions of users, billions of impressions and tens of billions of dollars in revenue to Facebook.

    Facebook will know all that Yahoo knows about their users. Facebook will have a larger audience, a better ad targeting platform and eventually more advertising market share than Yahoo.

    In short, Om is right: this move is disastrous for Yahoo and a coup for Facebook.

    http://expostfacto.posterous.com/the-scorecard-winners-and-losers-of-yahoo-fac

    1. Thanks Tom for your comments.

      I am surprised that not many are realizing the importance of this deal — it is a company defining deal and Yahoo is going to live to regret it.

      Facebook is slowly going to suck the life out of Yahoo via access to the contact list. :-)

  5. I agree that Facebook is becoming the arbiter of online identity. However, I don’t think that it’s because of this deal with Yahoo! There has been a clear trend in the last year towards Facebook connect. Several sites are using FB connect as their exclusive mode of user authentication.

    The Yahoo! deal is significant, but FB becoming the king of online identity was gonna happen anyway.

    I would also add that another big loser to FB connect is OpenID.

    1. Vishal,

      I don’t disagree on the trend, but I think Yahoo deal gives FB Connect a rocket-style boost. It takes them closer to their goal much much faster.

  6. Well said, Om.

    Facebook is going to win the “real identity” game and with it, the pole position for delivering demand-creation ads (as opposed to search’s demand-satisfaction ads) more efficiently.

    I do think, however, that there is space for Yahoo! in the world you describe. Bing delivers demand-satisfaction revenue to Yahoo via search, and Facebook delivers demand-creation ad revenue with better targeted brand/display ads. Yahoo sits in the middle and integrates these search and social experiences along with its own media properties and ad selling into a package for a large subset of the world’s internet users. Given its (still) massive reach, Yahoo commands very high shares I’m sure, and in the meantime keeps its capex low… making it a very efficient business.

    While it’s not a perfect analogy, I can’t help but think of the PC market. Intel and Microsoft have historically extracted the lion’s share of profits from the PC market, yet Dell has operated a very nice business for a good long time by (essentially) efficiently intelligently integrating Intel and Microsoft. And Dell has the option to swap out its parts if a better option comes along.

  7. So Much for OpenID — Google Embraces Twitter, Yahoo Embraces Facebook | John Paczkowski | Digital Daily | AllThingsD Thursday, December 3, 2009

    [...] intention of allowing Friend Connect to become for the social Web what Yahoo is to search. Although as Om Malik notes, it may not have much say in the [...]

  8. Om, you mentioned the ‘signing of a deal’ and yet I didn’t see any reference to a deal being signed in the Yahoo Press Release. Are you sure there was a deal structured or did Yahoo just decide to integrate their Facebook Connect relationship more deeply.

    If a deal was signed it’d be interesting to know the terms.

  9. Google & Twitter Friend Connect, Facebook Yawns – GigaOM Thursday, December 3, 2009

    [...] to become the ultimate identity broker on the web, Facebook with its Facebook Connect feature has a clear — and significant — lead. Google, on the other hand, is an also-ran here and its partnership with Twitter, announced last [...]

  10. Online-Identität: Yahoo integriert Facebook, Google integriert Twitter » netzwertig.com Thursday, December 3, 2009

    [...] und auf Sites einzuloggen. Nun wird Yahoo, immer noch das reichweitenstärkste Portal der Welt, Facebook Connect integrieren. Ab Frühjahr 2010 werden User Updates und Infos zwischen den beiden Internet-Giganten austauschen [...]

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