The one thing Microsoft gets better than any other company is the concept of ‘ecosystems’. It hasn’t been any particular product that has made Microsoft what it is today, it’s been their ability to foster and support self-perpetuating ecosystems around their platforms.
What’s the one thing that Facebook has done better than any other Web 2.0 company to date – foster and support a self-perpetuation ecosystem around their platform.
So is it surprising that Microsoft is keen to get in bed with Facebook, as reported by the Wall Street Journal today?
There’s the obvious partnership arrangements that would probably follow in terms of advertising but any deal could come with some interesting developments in terms of Live platform support.
Identity is one area I’m sure Microsoft would be very keen to strike a partnership agreement in. They have already stitched up a deal with social networking site Bebo and adding Facebook to the list of companies supporting Microsoft Live ID would be a great kicker to their hopes of establishing it as an identity platform with enough critical mass that other developer’s can feel comfortable supporting it. While OpenID kind of flounders around, I think Microsoft has a reasonable hope of getting some traction with LiveID. It has that massive developer base behind it and if they can have confidence that most every user owns a Live ID then it should pick up some steam pretty quickly. If part of a deal with Facebook came an agreement to support LiveID and other Live platform components, they would be well on the way to achieving the kind of critical mass they need in this regard.
I’ve heard some interesting ideas from Microsoft folk around the area of identity. I think they’ve learnt a lot from developing Xbox, about the power of knowledge and functionality that you can harness when the user is always authenticated with you.
The clearest advantage is in terms of profiling. If Microsoft can track and record more user attention gestures; ie what they click on and the websites they choose to visit - it can build better and more accurate user profiles, which I’m sure not too far down the track is going to become an important, if not dominant, ad-serving model. Facebook clearly tells you a lot about people, what they’re interested in and doing with their lives. As valuable as that data is to Facebook if you can take that attention stream out of Facebook and apply it to your ad-serving choices elsewhere then it becomes REALLY valuable.
To demonstrate. Say I join the group ‘Volkswagen drivers’ in Facebook, then it makes sense to use that knowledge to serve me ads related to Volkswagens or like cars, whenever the opportunity presents itself. Such a profile-based ad-serving model opens up far greater revenue opportunities for the majority of sites whose content isn’t particularly product-oriented and therefore not likely to generate big CPMs.
Then there is also the advantages of federated identity. The ability to jump between disparate web apps and share information between apps without the headaches of authentication is one of the main things missing from the Web 2.0 experience and again Microsoft will see itself as the company, which given its experience, can provide such an environment for both developers and users.
Given the level of lock-in with online applications right now, I can see federated identity as being absolutely key in providing a compelling ecosystem of online business tools and solutions. The only company really succeeding on this front right now is Salesforce, although Google has made some tentative steps with Google Apps single sign-on.
On the social front, Facebook has done pretty well on this front, even though some application developers have opted not to leverage the Facebook identity system.
So if Microsoft does invest in Facebook, I would see it coming with support for the Live platform. I’m sure Microsoft would dearly have loved Facebook to have been a .Net application, which would have made it a bit of a no-brainer but I can just see Steve and Bill salivating over the ecosystem that is starting to emerge at facebook.com.