Microformats and OpenID will kill Facebook's business model

Right now everybody’s talking about Facebook, “the social utility that connects you with the people around you”. Thousands of people register on the site every day, and the mainstream press drones endlessly about whether it’ll get bigger than MySpace, and then presumably take over the world. And even though I haven’t signed up yet, I know from looking over people’s shoulders that an incredible number of my friends and acquaintances are active Facebook users. Perhaps I should just give in, and sign up.

But is Facebook really the ultimate social networking site, the last one you’ll ever need to add all your friends to? Of course not: in a year’s time, some other site will be the trendy hangout that you can’t afford to miss out on. But the good news is that this constant migration from network to network isn’t going to carry on for ever — because we now have interoperable, open standards that will make the idea that all your friends need to be on the same social network seem quaint. The combination of microformats and OpenID will allow open websites to compete with the key selling points of walled gardens like Facebook — privacy and network effects — and as a result, kill their business model.

Walled gardens

As Jason Kottke says, Facebook is the new AOL — a walled garden, which you can’t access from the open internet unless you’re a signed-up, logged-in Facebook user. Signing up to yet another website, and then approving all your friends for the 14th time is clearly a pain, so why do so many people do it? Because walled gardens offer two key features that open websites don’t: privacy and network effects.

Privacy: only my friends can see it

When you add content to your Facebook profile, you can make sure that only your friends can see it. So the fact that you’re feeling grumpy today isn’t broadcast to the whole world, just to your network — and the photos from the party last night can only be seen by people you trust. This kind of privacy feature isn’t unique to Facebook, of course: you can achieve the same effect using Flickr or Twitter, for example — sites which aren’t usually thought of as walled gardens. But I argue that whenever privacy features are used on these sites, they behave like walled gardens — because in order to restrict access to a network of friends, all of your friends need a profile on that site. You effectively lock out any of your real-life friends that haven’t signed up for that website: a walled garden approach.

Network effects: all my friends are already here

The success of social networks like Facebook is clearly helped by network effects — the fact that if lots of your friends are already active users, joining looks much more attractive than if you’re the first to join. This applies equally to adding comments to other people’s photos on Flickr and writing on a friend’s “wall” on Facebook.

The business model

The business model of these walled gardens goes something like this:

  1. Offer our users privacy (and other services).
  2. Exploit network effects to get as many of our users’ friends as possible to join.
  3. Sell advertising to our massive captive audience.

At the moment, this model works — just look at Facebook and MySpace. But notice that during the second step, the site isn’t getting users to sign up primarily because they like the service, but because their friends are already on the network. Walled gardens exploit their users’ personal relationships to grow their proprietary systems — and on the internet, that’s never sustainable.

An open alternative

So what’s the open alternative to this walled garden approach? Microformats for relationships and OpenID for identity.

Microformats

Microformats are “a set of simple, open data formats built upon existing and widely adopted standards” — often referred to as the lowercase semantic web. Jeremy Keith outlines how the existing hCard and XFN microformats could be used to create portable social networks, so that each new website you join could automatically fetch a list of friends from a URL you provide. This wouldn’t have to be hosted on a blog or personal site — a profile page on a site like Flickr could automatically provide this information, just by using microformats in the markup. But what about privacy?

OpenID

OpenID is an open, decentralised identity system. The central idea is that if a person can prove that they own a URL, that’s enough to identify them. Simon Willison describes how OpenId could be used to create decentralised social networks, “with profiles tied together across multiple sites and relationships easily portable between services” — that is, you can restrict access to your group of friends even if they’re not members of your social networking website of choice.

If a social networking site combined these approaches, you could instruct it to restrict access to a group of friends that:

  1. Is defined elsewhere, without having to be manually entered, and
  2. Doesn’t require your friends to be members of the site to access your content.

This is the killer combination for Facebook’s business model.

Goodbye, exponential growth

Why am I so sure this will happen? Well, it might not work exactly the way I’ve outlined, but some kind of interoperable, open standard will eventually replace proprietary, closed social networks, because open systems always beat closed ones on the internet. This doesn’t necessarily mean that the sites I’m calling walled gardens are doomed though — they just need to open up, and rethink their business model.

Once you remove the exploitation of personal relationships I’ve described above, exponential growth of users is much more difficult to achieve. Now, new users won’t sign up just because their friends’ content is in your system — because they can access it anyway using an open identity system. To get them to sign up, you’ll have to convince them that your service is better than all the others — which means you have to offer the best user experience, not the largest network.

Selling advertising to a captive audience also becomes more difficult, because your audience isn’t really captive any more. If your users’ friends use RSS to access content, for example, they won’t see your site at all — and anyway your users are free to migrate to another site whenever they want to, because they now own their data in an open format. Perhaps this will result in more targeted, niche advertising — or even a service charge (gasp!), paid in return for a well designed, pleasurable experience. Either way, the Facebook model will fail — which means that sometime soon, we won’t have to join a new social network every six months. I’m looking forward to it.