The Scorecard: Winners & Losers of Yahoo, Facebook Connect 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 (s yhoo). 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 (s goog)) 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 (s MSFT) 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.