The Real Bubble | Social Applications

[Also in Hebrew]


You acknowledge and agree that Facebook may at any time in its sole discretion, without liability, with or without cause and with or without notice: (a) terminate this Agreement; (b) terminate or suspend your access to Facebook Platform, Facebook Properties and/or the Facebook Site or any portion or feature of any of them; and/or (c) remove, block, delete or disable access to your Facebook Platform Applications and/or or any Facebook Platform Application Content, including without limitation if we determine, in our sole discretion, that your Facebook Platform Application or any Facebook Platform Application Content is unsuitable for Facebook Platform, Facebook Site or Facebook Users ()

While the blogoshpere and the technological sections in the newspapers are running around the Web 2.0 buzz (and some of the 3.0 buzz as well), We keep forgetting where the real bubble for this technology lies. When Om Malik explained yesterday at TWS2008 that advertisers are the ones impeding the net from developing and dot com startups that develop Facebook applications without any business models get millions of dollars in funding, there’s only one question: when will people realise what Facebook‘s real business model?

Google shut down a few blogs which opposed Barack Obama, possibly because Obama supporters tagged them as spam. It was ll executed by automatic systems where the censorship was made by private entities, but it doesn’t actually matter, as Blogspot’s terms of service state that “Google may, in its sole discretion, at any time and for any reason, terminate the Service, terminate this Agreement, or suspend or terminate your account”.

Constitutional Law is probably dead and irrelevant; what was the private sector until recently  was settled in under “Private Law” or “Civil Law”, but today everything changed: Companies that develop applications for social networks or webservices are subjected to the new constitutional law, the Terms of Service.: The problem begins when stable business models that companies build upon and get their funding due to them are based on social networks’ grace. This is not a stable agreement, but a unilateral agreement that grants the social network (or the search engine) an exclusive right to terminate the agreement and prevent the company from operating. (And it’s important to understand that when I relate to facebook in this post I also mean any other social network or webservice like Twitter that allows 3rd party applications)
Now, some might say that Facebook’s income and  value are derived from the amount of applications it has. Cynicists may say something completely different: Facebook’s value is derived from its ability to monetize the applications that those will be able to run on the platform.
Mark Zuckerberg, Facebook’s founder, photo by KK+ under cc-by-nc-sa license.

In a year or two Facebook’s shareholders will come to their senses and start asking money from the leading hundred applications, as they are allowed to do. Their policy would be similar to this: An application with less than a million users may run freely, but once you obtained a million users, you’ll pay us one US$ per user. That’s fair, isn’t it? And then what? will these companies shut down and go home? not really.

It’s crucial to understand that when you develop a Facebook application or any other social network based application, you’re writing your source code on ice; it’s more than reasonable to assume that Facebook won’t charge you anything and will never shut you down. The problem starts when you want to establish a business model on something that’s more than “more than reasonable” (like investing your pension funds). That’s why, like you wouldn’t deploy a real product without contracting your deployment contractor, you really should consider doing the same with Facebook.

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