Saturday, September 15, 2007
Can Yahoo Beat Facebook?
During the heydays of the dotcom, AOL was riding high. It enjoyed steady subscriber growth and very little churn. It bought Time-warner and was going to redefine the media landscape. Ensuing events proved its strategy to be costly and foolish. The anticipated synergies never materialized. Amazon, eBay and Yahoo survived the dotcom explosion and have established robust business models with impressive market capitalization levels.
Nowadays, the question is who will win in the social networking space? Will it be MySpace? Facebook? Google with Orkut? Bebo?
Or will it be Yahoo? Yahoo got into the social networking scene with Yahoo 360 but that service seems to be losing steam. MySpace and Facebbok seem to be fighting for leadership (and Bebo seems to be doing well in the UK). Yahoo, still a leader as a destination site in terms of unique visitors, is now jockeying to compete against MySpace and Facebook with the launch of Yahoo Mash (in beta, invitation only). A CNET Review seems to indicate that it has a good chance.
To beat the leaders, you have to be not just different but also superior. It seems to have taken the best of MySpace and Facebook as a starting point. In addition, it has incorporated some core features of Wikipedia: your friends can edit your pages (a scary thought!) But in the spirit of wikis, there is a revision history so users can roll back the changes; and there are privacy options so that you can decide who gets the rights to edit and so on. From the review, it looks like they are extending the social networks to include the core ideas of wikis.
Ultimately, it's all about leveraging interconnected strands of network effects. First: Can it create stickiness within its customer community (direct network effects)? Will individuals switch from MySpace and Facebook to Yahoo Mash? Will wiki-like features catch on?
Second: Can it orchestrate a vibrant community of developers that design widgets for Yahoo mash (indirect network effects)? Will developers offer their widgets for Yahoo preferentially over Facebook? Mark Zuckerberg realized the importance of courting the developer community in establishing the Facebook platform.
The winner will be the one that can leverage both sides of the network effects in a virtuous dynamic fashion.
My prediction for the near-term: Advantage Facebook (Over 30 million active members and an enthused developer comnmunity that developed over 65 million applications!).