When i wrote The Demise of Google, i emphasized that Google's business model is all based on selling advertising space and that it has been amazingly incapable of creating new sources of revenues. Hence i predicted a rapid decline (of Google as it is today: Google is rapidly transforming into a venture capital operation that might continue to thrive for decades). The switching cost is basically zero: you can switch to another search engine without losing anything; you can upload videos to another service without losing much; you can use another mapping software and get the same directions; you can change email client and will only lose old emails that you probably don't need anyway.



I pointed out that Facebook, that relies on the same business model (of selling advertising space), enjoys a much higher switching cost: leaving Facebook means losing a lot of friends, their postings, your postings, pictures, etc. The only people who are willing to do that are Google employees who are under pressure to show their patriotic spirit by switching to Google+. This has nothing to do with the merits of Facebook. In fact, the features of Facebook are often maddeningly stupid even for hardcore fans. The fact is that Facebook is a platform of 800 million people.

Unlike the users of Google's search engine (who don't have to sign in), the users of Facebook have to sign in. Unlike Google, that integrates smoothly with the rest of the Internet world (e.g. Wikipedia), Facebook takes the user to a separate world where the rest of the Internet is not visible anymore. If you don't sign into Gmail or Google+, Google does not really know who you are. Facebook always knows who you are. Never in human history (not even in the Soviet Union) has someone held so many data about the ordinary lives of people.

Facebook will probably continue to fine-tune ways to gather more and more data about its users. Again, its business model is about selling advertising space, and the price it can demand is proportional on how intelligent the placing it is. Very soon businesses might have to pay a fee just to be on Facebook because social marketing is the single most powerful form of marketing (when you click "Like" on someone's post, you are recommending that thing to all your friends, who may then recommend it to their friends and so sorth). Hence the difference between Facebook and Google is that Facebook has the power and has the momentum, whereas Google will struggle to continue making money in its traditional ways.

If you are an investor in Facebook, that's the good news. If you are not, then there is really bad news in what i just wrote: Facebook is out to dominate the Internet, in fact is out to literally hijack and take over the Internet. Facebook is not using compliant HTML and the other standards of the Internet. It is not compatible with any other websites. If you have your own website, you can bid farewell to it right now: Facebook wants you to abandon it and move its contents inside Facebook so that it can automatically attach ads to it like it does when you post something on your wall. If this future of a company that owns so much information about everybody and that forces everybody to surrender more and more freedom, and that may turn the free and public Internet into the private backyard of a corporation, sound scary, there are only three forces that can prevent it from happening.




One is the government. There are antitrust laws that even broke up the biggest company in the world: AT&T. It would make sense to invoke an antitrust investigation against what is arguably the only social media in the world. Unfortunately, Google had the awful idea of introducing its own competing platform, Google+: it will probably go nowhere, but it creates the perfect alibi for Facebook against any antitrust investigation (there is an obvious competitor, and its revenues are even bigger than Facebook's). Government, if it were indeed working for the people, could also enact legislation to limit what all these Internet juggernauts routinely do: harvest your personal data and make money out of it (directly or indirectly). Basically they turn your private life into a commodity to be auctioned off to the highest bidder. Sounds amoral? Apparently not for those who make money out of it (Google and Facebook) and for the thousands of businesses that are willing to pay for it and for the politicians that never interfered with this practice.


Second, Facebook might implode just because of its own success: about 30% of its employees are bound to become millionaires (ed. approximately 1,000) when Facebook goes public. If all of them retired to enjoy their wealth, it would be a crippling blow to Facebook's internal processes which might result in so much instability in the platform to give Google+ a chance to steal the limelight. However, that's not very likely because a) Google+ is not exactly a stellar product and b) Facebook is actually a very easy platform to maintain with very few features and virtually no request from users to change (in fact, users tend to get mad whenever Facebook changes a feature).


Last but not least, it could be that Facebook's hyper-proprietary strategy backfires. Will Wikipedia accept to move inside Facebook? Probably not. Will government agencies and embassies accept to move inside Facebook where their content is subject to Facebook's policies and hosted on Facebook's servers? Obviously not. Will even businesses accept to live inside Facebook, knowing that Facebook controls every business transaction? Unlikely. The benefits of social media do not justify the risk of losing confidential data. On the other hand, When in the 1980s Apple chose to go proprietary, many saw it as a mistake: the world wanted Microsoft-compatible software and Intel-compatible hardware. Decades later Apple has become the most valuable company in the world precisely because of its proprietary software and hardware; and its smartphones and notebooks are probably used for sensitive transactions too