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Friday, August 03, 2007

Research Note: Open Beats Closed, Facebook Edition

Netvibes creates a Facebook widget.

Many are calling this a platform war - Fred links to Dave W there. It's more an anti-platform war.

In this anti-platform war, there are few proprietary standards, no hard lock-in, and no expectations driven FUD.

Lots of people the Netvibes Facebook widget are saying it's a brilliant move. It is - absolutely.

But it's also a deeply economically determined move - it was an almost inevitable one.

Why? Because open beats closed.

That's a complex statement, so let me unpack it a bit.

Think about it this way: as value chains disintegrate, as interaction accelerates, as the cost of coordination vaporizes, there are inexorable pressures for firms to open access, source, etc.

The costs of staying closed, in such an economy, are simply too high to bear.

More intuitively: what's the equilibrium of the Netvibes/Facebook (etc) game? Each can choose to open, or to close. Invariably, each is better off opening, and seeding a larger ecosystem.

The problem, of course, is that, in that case, it's key competitor can also gain access to it's resources. But if that competitor also faces inexorable pressures to open - then you're always and everywhere better off opening.

The equilibrium, then, is that, in the long run both players end up with access to exactly the same resources. Payoffs depend not on how closed you are - but on how open you are.

So don't mistake Facebook's "platform" strategy for yesterday's inert, closed platform wars. There are enormous - irresistible - economic pressures for Facebook (and all next-gen media players) to open. Facebook may be AOL today; but it will be a lot more like Wikipedia tomorrow.

No matter how evil a player is - and make no mistake, Facebook is deeply evil - through small steps, or big ones, open they must; or risk strategic irrelevance.

-- umair // 10:18 AM //


i hardly use facebook, although it has been under a lot of bloggers scrutiny recently. Could you explain, your "facebook is deeply evil" comment. I'm just curious to see what they are up to in your eyes that you object to.
// Blogger james burke // 10:12 AM

I have always believed that closed ecosystems are less likely to thrive (it's an ecological fact).

But one thing I have been thinking about lately..i’ve been wondering if the under 22 generation who has never known life without the network sees facebook with the same lenses and biases (ala the AOL model) that we do.

If their philosophy is 'i am the network' and their entire network happens to be with them as well, then do they actually see the fact that it's closed? Or has closed been redefined somehow to mean a system that doesn't give them what they want, or allow them to do what they want to do in any given period of time?
// Blogger Leigh // 11:41 PM
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