International Law

ReadWriteWeb has a good piece on the future of social media:

Social networking is at a major fork in the road. Down one road is adding more features to a walled garden and opening up just enough, so that users seldom need to leave. Most sites are going down this yellow brick road and the prize is clearly a big one. But they may end up back in Kansas. Down the other road, lies a future of being the primary repository for your connections (aka the social graph), but with this data available via open APIs to anybody who needs it. That is a utility type model, and as with any utility, it can be hugely valuable at scale.

Deciding which path to take is a real decision. A botched choice will likely end in failure, albeit via a long, slow decline.

The problem with the first road is that it relies upon a revenue model that is native to social media. What revenue model works for social media? The assumption is advertising, but CPM comes from traditional mass media and CPC is ideally suited to search. Where is the ad model that is native to social media? At the moment we are force-fitting CPM and CPC into social media for want of anything better.

Some might argue that there is no ad model for social media. We don't have an ad model for telephones, afterall, and that's a two-way communication medium like social media. Ominously, we didn't have an effective ad model for email, which is the earliest form of social media, until Google treated email as just more search fodder for CPC.

If social media is not funded by advertising, it must be funded by subscriptions or transactions. Neither is easy.

Read more here.  Against this backdrop there have been a couple of developments in the social media world over the past few days.  First, the Google-Facebook arrangement has collapsed:

Google Inc.'s announcement of a service to "make the Web more social" was decidedly casual, or staged to seem that way.

Standing beside a campfire, the company's engineering director, David Glazer, explained how, through an agreement with Facebook and similar sites, the effort would serve a primal human need.

"We all like huddling around fires, and huddling around food and talking to each other -- people are social," Glazer, dressed in a red-checked shirt and sneakers, told about 100 people gathered outside the company's headquarters in Mountain View, Calif., last month. "With Friend Connect we are trying to make that happen everywhere on the Web."

Within three days of the campfire, a dispute erupted between Google and Facebook, its largest partner in the new service, that reflected the fact that for Web companies there is nothing casual about the business of Internet socializing.

There's too much money, maybe billions, at stake.

Facebook, the burgeoning social network, abruptly withdrew its support for Google's Friend Connect, meaning that none of Facebook's tens of millions of members could sign on to websites using Google's new service.

Coming so soon after the highly publicized launch, it was an embarrassing rift.

Read more here (from the Los Angeles Times).  Second, a report suggests that the web will be dominated by two players - Google and Amazon:

An Internet analyst for a major Wall Street firm argues in a new report that Google Inc and Amazon.com Inc will be long-term winners, while Yahoo and IAC InterActiveCorp fall by the wayside and eBay Inc becomes a merger target.    

Sanford C. Bernstein analyst Jeffrey Lindsay argues in a 310-page report entitled "U.S. Internet: The End of the Beginning" to be published on Tuesday that Google and Amazon are best placed to withstand the current economic downturn.

"We expect two players to continue to perform strongly, Google and Amazon," Lindsay writes. "Both Google and Amazon.com are still racking up annual growth rates in the 30-40 percent range, with only a relatively modest slowdown in sight."

Lindsay reiterates his previous positions that Yahoo eventually will be sold to Microsoft Corp and that Barry Diller's IAC e-commerce conglomerate will go ahead in August with its five-way split-up, as planned.

"Arguably the weakest players have strayed furthest from their original competences and have been operating largely as conglomerates," the Bernstein analyst says of Yahoo and IAC.

Read more here (from Reuters).  And finally Microsoft is wanting the a piece of the web action:

Lloyd Braun?the former Hollywood super-programmer turned Yahoo entertainment czar turned Hollywood and online programmer?has signed a multimillion-dollar deal to make an original destination site for Microsoft?s MSN portal, aimed at aggregating celebrity, entertainment and pop culture news, according to several sources.

With the still-unnamed site, MSN plants its own Paris Hilton flag in a very crowded field, which has numerous competitors such as People.com, PerezHilton.com, AOL?s TMZ.com, PopSugar.com and Yahoo?s OMG.

It is also interesting that Microsoft (MSFT), which has focused its efforts of late on its technology, especially related to online advertising and search, is making another foray into the content arena via MSN, where it has had mixed results in the past.

Read more here (from All Things Digital).  But returning to ReadWriteWeb, Bernard Lunn offers a way for the future:

Here is my take on which road the big social networking sites could take:

1. MySpace could potentially get away with the walled garden approach for a pretty large mainstream market, using music as the fundamental draw and later leading into other arts and entertainment. This makes MySpace less age-dependent than Facebook. Everybody loves music, art and entertainment, from pre-schoolers on up to grandparents. News Corp. is a media company through and through, so this route is in their DNA.
2. Facebook will have to become a utility for the world or a niche walled garden for college kids. Their DNA is too young to predict which way they will go. Both are viable, but neither will justify a $15 billion valuation, so they won't make this decision until new management steps in following a crisis. They cannot become a walled garden for the world, because their core community - college kids - will move into the world of work where they have to communicate in the wider world of the Internet. Once they have left college, their only connection to each other is as alumni and that ends up being a relatively weak connection as we grow older (despite what every generation believes when they are at college).
3. LinkedIn has a shot at becoming a mainstream, but work-centric, walled garden since the working world is constrained enough and follows well-defined conventions. LinkedIn is the network I use regularly and I have written about it before many times. They have now reached the stage where if they offered webmail that was as good as Gmail (and obviously as open as any standard webmail), it could become the default hangout for biz types. "Suits" could gradually stop talking about "living in Outlook" and talk about "living in LinkedIn." Add in some simple RSS-based startpage-like functionality and LinkedIn would be the place to start and end the workday. Biz people will pay a reasonable subscription fee - say less than $100 a year - for a package like that without any advertising. That is a bit of a stretch from where LinkedIn is today, but fundamentally viable in my opinion.

Clearly, any venture that succeeds in building a mainstream walled garden will become hugely valuable. They will effectively become the Internet for millions, which might even justify a $15 billion type valuation. The problem is that it is a very, very hard road to navigate successfully.

The mass-market utility model could also be hugely valuable at scale. My simplest description of this would be "social graph + communication tools." The communication tools could be email, SMS, VOIP, poking, walls, vampires, whatever turns people on. The social graph is the spam controller and way to make connections. The obvious players here are the vendors with big email networks - Google, Yahoo!, and Microsoft (GYM). This is the background story to all the M&A "sturm und drang."

The one company that most needs to make this strategic decision - Facebook - is the one that is most constrained by that paper valuation of $15 billion. Neither route - niche walled garden for college kids or mass-market utility going up against GYM - will justify $15 billion. So they have to pretend that mass-market walled garden is viable, even though nobody believes that anymore. That is one nasty dilemma. Do you think Microsoft knew that they were giving Facebook that nasty dilemma when they agreed to a $15 billion valuation? Gates and Ballmer are smart enough, in my humble opinion.

The mass-market utility model will win out in the end for 3 reasons:

1. The social graph is so closely linked to communications, which has always been a utility model.
2. The ownership issues around the social graph are murky. A utility skates past that problem, saying "you own, we manage." AT&T does not own your Rolodex, or insert ads when you are calling Mom because they own your connection to Mom.
3. The social graph has to be monetized in creative ways and the best way to make that happen is make it available to all the entrepreneurs and established businesses, on clear and simple terms.

The mass-market utility model will work through an API. That sounds similar to what is already out there, but with one big difference. The current APIs are all about getting your apps INTO a walled garden, or two or three walled gardens. The utility API will be about accessing the social graph, getting the social graph OUT of the utility and into your application, for some pre-defined cost. What you do after that is entirely up to you.

Read more here.