Social media for the Paranoid

So the Financial Times met Facebook this weekend with the headline;  ”Facebook becomes bigger hit than Google“.

One interesting point they made is that in September MySpace was bigger than Google, but that lead faded. Perhaps that should be the subject of this post, but the more interesting point (for now) was made by Lucy Kellaway – and she made it in the headline to her column; “Generation game plays out on Facebook”.

For those of you that were not watching British game shows in the late seventies “The Generation Game” on the venerable BBC involved two family members of different generations having to work together to compete against three other families to win a bunch of prizes that rolled off a conveyor belt, and as far as I can remember consisted mainly of cuddly toys and hair curlers. It also probably included flared jeans, Donny Osmond and “Saturday Night Fever” LPs – not to be confused with “Saturday Night Live”.

The seventies was the time of “Telephone Booth Stuffing” in case you wondered what else people did without social networks – basically an older version of adding people as (very) close friends.

Anyway I digress. What was funny (if anything besides the platform shoes) about the TV game show was the inability of people from the same family, but different generations, to understand each other sufficiently to even organize a phone call in a phone box.

This is the point Lucy makes in her normal, understated, style; “This isn’t a small thing: it’s a ginormous non-meeting of minds between two generations over what is not just a different way of communicating, but a different way of living”.

As she goes on to say that from her perspective (and from mine, if I am honest – after all we both drank far too much Pimms at the same University at roughly the same time, so it is not surprising we have similar social norms); “By contrast, the idea that communication becomes a random broadcast to 500 “friends” about what you were up to last night is perfectly incomprehensible.”

But seriously, in the same way that an older generation did not understand the impact of email (“what is wrong with writing a letter, or picking up the phone?” – the Lucy / David generation risks completely missing the impact that training an entire generation to share everything with their “friends” – at least when I shared a phone box with a friend or two I did not tell them with whom I spent the previous night. Each generation is having shorter conversations, more frequently, simultaneously with a wider and wider circle of “friends”.

If you are running a global software development project – perhaps this is the best news ever, as social media become the new collaborative platform?

Social Media and Electronic trading platforms are both Cloud Services - superficially they seem to share nothing in common, but on closer inspection there is alot that they could learn from each other. This article takes a first pass at looking at the implications of this comparison.

Cloud Services are all the rage – everything is apparently moving into the Cloud – or more precisely into a datacenter not owned by you. The term “managed service” seems so old fashioned and quaint today.

It seems to me that Cloud Services really divide into two; commodity and monopoly.

Commodity Cloud Services are all about the basics of storage and processing – online backup, email, web hosting, user authentication, and conferencing. Essentially all the valuable data belongs to the customer, and the vendor relies upon price and reliability to sell. The competition is essentially in-house - but once a company wants to outsource there are alot of options from some really big players (Microsoft, Google, IBM, Amazon).

Monopoly Cloud Services have something that the user can’t get elsewhere. That used to be specially collected data (Lexis -Nexus) but more and more it is moving towards user generated data. So when you enter your data into a Social Network Site it ceases to be your data and instead belongs to the Social Network. This is why Union Square Ventures (early stage Twitter investors) invested in Twitter – it is pretty hard to argue with their logic or their foresight. It is also not surprising that they don’t believe in software patents, which were the traditional way a software company enforced a monopoly (well until the time it took to get a patent became three years plus, and hence only useful to the people who focused on patents and not building a business, but I digress).

So once you conclude that the user data is exceedingly valuable you need to make more of it. You really only have two levers – more users and more open user data. Hence the push by Google and Facebook to relax privacy settings.

Electronic trading platforms face the same issues – their value depends on the liquidity of the market (how many players and how much trading volume), cost of a transaction, lower spreads (the delta between buying and selling an asset), and greater transparency. So they focused on getting lots of real users on their network Then they discovered High Frequency Traders and their world changed – now these firms are responsible for about two-thirds of all US equities volume, and life without them is pretty much impossible for any exchange.

So why do Social Networks care? Well they are about to go down the same path.

The first big step was taken by MySpace with its joint venture with three (Warner, Sony BMG, and Universal) of the biggest record companies. OK – they did not want to do this deal, but they did not have alot of choice given that they were being sued by Universal over copyright infringement.

So today the front page of MySpace has Britney Spears – while the frontpage of Facebook is pitching running the Facebook application on your mobile phone. In other words Facebook is focused on driving up user generated content, while MySpace has switched to professionally generated content. Brittney Spears is the High Frequency Trader of the Social Networks space.

Now the Financial Times has an article on a Japanese competitor called Ameba Now, who has reached 1 million visitors after three months of growth. They allow usernames in Japanese characters – but the more probable reason for their growth (according to the FT) is that they have persuaded celebrities to use their service.

Does Facebook need Lady Gaga? Yes – long term they will have no choice because while the user’s own data is valuable it is also replicable.

On the plus side, according to Nielson, in January the time visitors spend on the Ameba site is seven minutes as opposed to twenty-five on Twitter – but the addiction to High Frequency Celebraties seems to be unavoidable.