How Facebook is creating the 4th wave of Web growth, and why…do you LIKE it?

Facebook recently announced, at its f8 developer conference, the launch of its ‘open graph’ API and new features for Web publishers. While most geeks are aware, excited and/or scared at this, here is a simple summary for everyone else. The geeks can jump to the next paragraph.

Fundamentally, the idea is to  ‘open up’ the viral toolbox that exists within Facebook to outside Web sites:

• You could ‘like’ someone’s post ? Now you will be able to ‘Like’ almost anything on the Web, from a Jean’s on Levi’s store to a News article, or even a consumer review on Amazon
• You could see which friends were using such application, member of which group you were browsing at, etc… ? Now web sites will be able to personalize your experience based on what you friends like too: showing relevant items in e-commerce, news, etc…
• You liked to see fan /friends activities ? You can now see it on another site

As a note, many of those social tools won’t even require you to sign in to the Web site. As long as you are logged in into Facebook, Facebook will be able to display the relevant content (without passing your details to the site).

Those announcements have created huge reactions across the Web, from enthusiastic to really scared. So, let me jump on the bandwagon and share a couple of thoughts.

Let’s start with the positive. As I put in the title, I believe that this announcement is creating what I call a 4th wave of Web development and growth. Don’t look at those waves on Wikipedia, I am just putting this together myself as a personal perspective. Interestingly enough, most of those waves lasted about 6 years:

• The first wave of Internet development is due to the invention of the World Wide Web, to which a Belgian contributed (Robert Caillau), in 1989. I still remember using a ‘World Wide Web home page’ by the W3C back in 1994 – at that time, most of the key links to navigate through the Web still held on a page. It span the world of ‘Read’ web and enabled people to discover wealth of information and content. This itselfs created the need for powerful search engines like Alta vista then Google
• The second wave was born with eBay and Amazon.com, both founded in 1995, so 6 years later. It created a whole new way for people to use the Internet, what I would call the ‘Transact’ web with the rise of ecommerce
• The third wave took a bit more time (dot.com bubble burst explains it). I date it to 2004, the year Facebook was founded. While ‘social’ Web initiatives had appeared before that, Facebook got to become the fastest growing and largest consumer service ever. I call it the ‘Connect’ Web as it enabled to discover and share stuff with people you were connected with in a much easier way. It is best known as Web 2.0 or Social Web.
• The fourth wave is potentially now, or another 6 years later. You will notice that, while all those waves enriched the whole web, they remained relatively independent of each other. Now Facebook is trying to put it all together, to create the ‘Read + Transact + Connect’ (RTC) web. The glue that some people had in mind but none had the scale to impose, nor the ability to create immediate ‘win-win’ between them and publishers (you get more viral effect through sharing, we get more data). Facebook has it.

With the RTC Web, you will be able to move seamlessly across read experience from global and friend news, shop along with friends and see what they like, get personalized recommendations based on your history of ‘like’ and the one of your friends, comment a sport event online while it’s happening, with your friends, etc… In a nutshell, everything is integrated in a seamless experience, to maximize the value of your friend’s recommendation and connectivity, optimize your shopping, and discover new information and experience based on both algorithmic and social power.

Too big for Facebook ? As further evidence that this looks like the ambition of Facebook, let’s ponder on the fact that Facebook, on top of the above mentioned features, is going to push web site developer to include ‘semantic’ data into their page. So Facebook will ‘understand’ that someone who pushes the ‘like’ button does it on a book vs a news items, and will be able to derive much more intelligence from that knowledge (ie ‘And did you read that book too ?’).

It sounds great…or scary. Beyond the usual concerns around the privacy implications, one can be scared that the control of the data about your ‘likes’ are with one company: Facebook. This must be too much power. No doubt. It will either a big success or a major push back, but I would opt for the first choice.

Let’s consider what’s a stake for them. For me (personal  interpretation), it stands in 6 letters: SEARCH. Here a 5 reasons why:

1. By opening the ‘toolbox’, Facebook will actually lose some advertising revenue, since the need to maintain traditional ‘fan pages’ within Facebook will decrease, and traffic will/may go down. The older play of ‘drive traffic to Facebook’ does not apply so much anymore. There must be a bigger game at stake
2. Clearly, the traditional banner advertising is nice but decreasing in yield and amount. Click-rate have decreased over the last years and will continue to do so. The Web is plagued with overcapacity. Yet, so far this has been the main driver of Facebook revenue
3. Search still takes the lion’s share. The main difference is that when you see a banner, even if well targeted based on your geo, socio-demo and the likes, your are potentially less interested because you are doing something else, like checking your friends news. In search, when you see an ad, you are actually searching something related. Click-rates are higher and the value of the click is higher too, because the chances are higher that you are a prospect vs just curious. Search is very attractive and Google has a license to print money at this point
4. Facebook and Microsoft are partners, and Bing can only win with a truly differentiating proposition against Google. Combining ‘social search’ (what your friends have looked at and like) and algorithmic search (like Google) seems like a killer idea
5. A route to achieve search dominance is to become you Web browser’s default home page. With the wealth of ‘likes’ by friends on news and others, Facebook has a good shot at it. Look at this Facebook attempt for a first version

In a way, this would not be bad neither as it would stimulate competition in the search business. Of course, traditional advertising on Facebook would fare better since it would improve ad targeting and open other revenue streams, but I fundamentally think that they are after another holy grail.

Whatever happens, both on the Web and for Facebook, we face exciting times ahead. The Web is still in its infancy and interesting developments will come – let’s watch this space.

Ok, all nice and great, but do you LIKE it ?