After yesterday's announcement of Yahoo intergating wih Facebook Connect, comes the news of Google and Twitter joining forces to allow Twitter integration with Google's Friend Connect.
John Battalle reads this as "Twitter, as in Not Facebook". On the opposite side, Marshall Kirkpatrick's take on it is "just like Yahoo bowed to Facebook, Google is bowing to Twitter".
I think I have a different view of this. Despite the timing of both transactions, they represent different strategies to me. Yahoo's move was a bow to Facebook, in favor of its users and the utility they extract from Yahoo, but eroding a strategic advantage Yahoo may have pursued through its massive reach.
Google's move, on the other hand, is less about bowing to Twitter. Twitter knows surprisingly little about its users, whereas Google knows a ton - thorough clickstreams, search behavior and Gmail. In fact, I'd say Google still owns a much larger chunk of the social graph than Twitter. What Twitter is great at is realtime and declared interests. And it's growing super fast.
This move by Google and Twitter makes me suspect even more my prediction yesterday. This alliance will allow Google to observe how Twitter helps its users and evaluate Twitter as a potential acquisiton target. It will also help Google to preserve some ground against Facebook, who has now clearly become the only contender to Google for ownership of the identity layer of the internet.
Today's announcement that Yahoo is integrating into Facebook Connect must have been accompanied with the sound of champagne bottles popping over at Facebook's headquarters. It's a big victory for Facebook as it advances towards ownership of the identity layer of the internet.
To be honest, I am a bit puzzled at the early concession by Yahoo. I am fuly convinced that by now Yahoo sees itself as a media company. It's obvious with its concentration on content. But, it also has an enormous amount of data on users and, through Yahoo Mail and Yahoo Groups, a nice chunk of the social graph. And I would have expected Yahoo to try to extract some value out of that.
What's weird is that Mashable is calling this:
"...a no-brainer for Yahoo, who has been trying for years to make its services more social on its own. Now, they’ll start to see some of the benefits that smaller publishers have seen from Facebook Connect (more comments, extra traffic from Facebook, etc.) on a massive scale."
That is ridiculous. Yahoo is not a small publisher. It's one of the first and greatest destinations on the internet. It's got as much traffic as Facebook and more members (500m vs Facebook's 350m). Why is Yahoo doing this? And isn't it ironic that the announcement is coming from Jim Stoneham, who's responsible for Yahoo communities?
Om agrees with me and sees Facebook as the big winner and Yahoo as the big loser here, and compares this move to Yahoo's deal with Google in terms of magnitude. I think this is actually a bigger deal. In search, Yahoo lost to Google's technology. It did not have much chance against Google. Whereas in this case, Yahoo's still got a ton of data (groups data, mail-related social graph, hotjobs-driven professional information, flickr's social graph, etc.) to be a contender in the identity layer game.
I expect the next move from Google. Facebook's got a lot of momentum and Google can not watch this passively. I'd predicted Twitter being bought in 2009. It was not. 2010 maybe?
I've been meaning to write about the News Corp - Microsoft deal rumours of which have been afloat for a few days, but lots of traveling and two events got in the way. The deal involves MSFT paying News Corp to block Google from accessing its content and having it exclusively indexed by Bing.
My first reaction to this is that it won't work. I beleive that information wants to be free and we see versions of that play out all over the web. I am all for creative monetization of attention, but gaming the system with biz dev deals does not seem to me the smart way to go about it.
One area that this "shift to free" has worked extremely well is news. There has been much said and written on how the web is killing journalism and that the news room is going to die because of the web. While many print media outlets are being hurt by the reduction in friction in news publishing, I think the casualties have not hurt the quality of the news we consume. If you look at the example of the reporting the blogosphere (especially Arrington) has done of the recent Scamville issue, and compare it with NYT's coverage of it (as Fake Steve Jobs did), you can see how less friction has led to better news in some cases.
In any case, my big issue with this deal is less the economics of attention but the fact that this type of one-on-one agreement for exculsivity is just unnecessary friction. There is no value being created for the ultimate consumer of news. The consumer has so far voted with her clicks that she's found the way Google has directed her attention to news more valuable than the way Microsoft has. Now MSFT and Murdoch are forcing her to either go to two sources for her searches, or switch to what she feels is a lesser search engine.
Now, I also think this is something Google has had coming. In its decisions regarding the economics of attention, Google decided on a black box approach. Albert Wenger has written a smart post on this issue:
One of the reasons that Craigslist is so hard to attack is that Craig has chosen to the give the bulk of the benefits to the network itself (as “consumer surplus”) by operating most of Craigslist for free. Google made a different choice, which is to keep a ton of the economics for themselves (and often in a non-transparent manner, i.e. it’s unclear how much of the economics Google takes). That will eventually create openings for others based on a willingness to share the economics differently.
Microsoft took a first step into that direction with the cash back for shopping. A deal with news organizations would simply be a further step in that direction. It is therefore not clear that Google is maximizing long term value by hanging on to as much of the profit as they are. That is the real heart of the ongoing conflict over news indexing.
As the attention economics gets more and more streamlined, we will see similar attempts at biz-dev'ing by incumbents. Most attempts will be unnovation (to borrow Umair's term), and will not lead to any disruption. The exciting developments will focus on increasing value. I try to keep focused on those.
