Facebook gets on with business

October 9, 2007

Facebook is no longer just a social time waster, it's a platform for
on-demand software. Randal Leeb-du Toit talks to the developers building
this new world.

EVER wondered what your stripper name is? If so, you're not alone - 2.7
million Facebook users have added the What's My Stripper Name application to
their profiles.

It's just one example of the viral power of the Facebook online social
network - and a hint to its potential as a platform for marketing and
delivering on-demand software.

Two weeks ago, news broke that Microsoft was in talks to buy a slice of
Facebook, which would value the company at $US10 billion ($A11.2 billion). A
week later it outlined its Microsoft Online strategy, of "software plus
services" delivered partly, or entirely, through the web browser.

TheBroth doesn't need Microsoft to validate the potential of software
delivered online. This Perth collaborative art community, launched last
year, wrote What's My Stripper Name.

TheBroth's founder Markus Weichselbaum (aka Bambi Candylips) says Facebook
was a chance to show the team's intellectual property to many users, rather
than attracting them to separate websites.

"Our decision to enter this space was for commercial reasons," Mr
Weichselbaum says. "We're lucky that we are working on applications that are
fun to develop and fun for our users."

Its first application, PuzzleBee, transformed a photo into a puzzle to
share. When the number of users increased exponentially - now more than half
a million - he realised he was on a winner and a portfolio of applications
was built.

They have more than 5.7 million users, helped by virally attractive
functions such as male stripper names and rating friends' names.

It's just one of the success stories on Facebook's open development
platform, launched on May 24. A hundred days on, there were more than 70,000
developers on Facebook's developer forum and more than 3000 applications
vetted by Facebook for addition to the system.

While most, like Stripper Name, are just for fun, Facebook obviously means
business. Last month it announced fbFund, $10 million of grants for anyone
interested in building their business on Facebook's platform. Any individual
or company can apply for $25,000 to $250,000, as long as they have not
raised any formal venture funding. It is administered by Facebook but funded
by venture capitalists.

"We are forming this fund to help grow the Facebook application ecosystem,"
the company wrote on its blog.

"By decreasing the barrier to start a company, we hope to entice an even
larger group of people to become entrepreneurs and build a compelling
business on Facebook
"We hope this is also a funding model that other venture capitalists will
follow."

Kazaa's former chief technology officer, Phil Morle, says the most
compelling aspect of the platform is access to millions of users and the
very fabric of the social network.

"Developers can create a rich universe of people and connections without
requiring years of hard work and luck. In addition, the technical approach
Facebook has taken and the developer documentation they have created has
enabled developers to quickly get results by building on the languages and
models they already use."

Companies have already set up to focus on Facebook applications. Social
Media founder David Henderson says Facebook use is all about Generation Y,
which spends much time in this medium.

"Facebook is the new TV," Mr Henderson says. "Only this medium is social and
engaging, not passive and linear." Social Media has raised $1 million from
Silicon Valley venture capitalists Charles River Ventures.

Understanding what users of a social network want is key to getting them to
download and use a developer's applications, says Jia Shen, chief technology
officer of California-based RockYou. It serves 150 million applications to
more than 200 countries across several social networks.

Mr Shen says his applications are tailored to social networks' needs.
MySpace applications cater to self-expression and provide flashy decoration.
Facebook applications are about users interacting with the software and
their friends.

"MySpace is about meeting people and has a strong dating aspect, whereas
Facebook is about people you've met or already know," Mr Shen says. "On
MySpace 80 per cent of the views are of user profiles. On Facebook people
spend the majority of time on the newsfeed page and from there they launch
off into the different applications they are interested in."

RockYou, which received a second round of venture-capital funding in May,
launched some of the first applications on Facebook. One of its most popular
is Likeness, which enables a user to discover who they most look like among
their friends or film stars.

Mr Shen says the concept was that a user expresses herself or himself and
then pushes the application to friends, saying "Hey everybody, this is more
interesting if you engage with it, too."

"Because a user's friends are there, it's a whole lot more interesting."

Applications have to be about long-term value rather than converting people
into users.

A good example is the Zombies game, by which people bite friends and turn
them into zombies.

"It's only been three months but Facebook applications have already gone
through five epochs of evolution," Mr Shen says.

"Zombies started out as a goofy game but the real value of this application
is leveraging the horde and the network effect of how many friends a user
has infected.

"This allows the user to level themself up and engage in different types of
battles."

He sees applications such as Zombies including item acquisition and trading.
This is the long-term dream of many companies - using the platform to make
money.

RockYou is leveraging the reach of its applications into making money. For
example, it helped Yahoo! launch a music-video application by integrating it
with its Likeness and Superwall applications.

It also promoted the application on its Facebook advertising network, which
has 100,000 installations a day. This resulted in the Yahoo! application
growing 200 times faster than it would have otherwise.

RockYou's advertising network helps small developers to launch applications
at a fast pace - it charges on a cost-per-install basis and guarantees a
certain number of users.

RockYou makes money from advertisements on the application pages and brand
sponsorships. It recently did a James Bond Casino Royale campaign on its
Slideshow application.

THE business angle of Facebook has not escaped venture capitalists. Altura
Ventures is the world's first Facebook-only venture capital firm. Chief
executive Lee Lorenzen says Facebook will have 200 million users and be
worth $100 billion in 18 months.

"This is about the social operating system and if we look at the huge
fortunes made around the internet browser, the equivalent time period to now
would be 1994 - about a year before Netscape went public," he says.

Mr Lorenzen says the idea is to write software that entices a user back
frequently to the canvas page, where they will want to interact with it
repeatedly.

He says Facebook's success is a wake-up call for companies such as Google,
which positions itself as a door to the web.

Social Media's Mr Henderson agrees.

"Like Netscape's browser challenged Microsoft's dominance a decade earlier,
the social network platform will challenge Google's dominance.

"It won't happen overnight but the seeds have been sown.

"We are transitioning from a web of content to a web of people - from page
rank to social graph."

Facebook is not without controversy. Mr Weichselbaum warns that Facebook is
"a young platform on many levels".

"Serious developers used to serious application development may find it
difficult to keep up with Facebook's unannounced code releases," he says.

Balancing the interests of users and developers and maintaining the security
of the site is paramount. Facebook issues new programming code most Tuesday
evenings from its Palo Alto offices. This sometimes breaks a developer's
application.

"Users oblivious to the inner workings of the Facebook developer platform
leave scathing reviews on applications they feel are badly programmed or
don't work - even though the developer is innocent and Facebook itself is to
blame," Mr Weichselbaum says.

"Within the many-thousand-strong Facebook developers' community, voices are
getting louder that accuse Facebook of acting recklessly for not testing new
code enough before releasing it."

Rather than putting him off the platform, Mr Weichselbaum treats these
issues as "opportunity costs".

But the big question is how big is this opportunity?

Mr Morle cautions that Facebook risks flaming out if users get bored. The
Facebook team and outside developers need to innovate to keep users coming
back.

"I'm waiting for Facebook to allow us to get access to their application
platform interface from outside of Facebook.

"They could become a unified service for users to store their
relationships," he says.

FACEBOOK

THE STATS

Founded: February 2004

Open registration policy: September 2006

Facebook Platform launched: May 2007

Page views per month: 54 billion

Active users: 43 million

Australian users: 1.4 million

Average time on site per user per day: 20 minutes

Average weekly growth since January: 3 per cent

New applications added per day: 100

Photos uploaded daily: 14 million

Official blog: http://blog.facebook.com

Source: Facebook.com