My completely speculative theory on the social operating system.

There is a battle for control of the next generation of the internet, and this revolves around my thesis that the current phase in the evolution of the web involves the connecting of people.  The battle is being waged by google, facebook, myspace, and a littany of others all vying for this control.

How we got to this point.
The first phase of this battle was about amassing as many users as possible as fast as possible. These users are your asset, they make your network exponentially more valuable. Facebook’s 70 million users are creating billions of unique connections, these connections each hold an intrinsic value in the grand scheme.   So they gave us developers a platform, a platform which is mutually beneficial.  This platform enabled them to double their user base, and at the same time offered the developers a simple way to tap that large and growing user base. 

So while facebook was giving us apps on their own, google was getting all the networks together to build their graph for them.  Google has seen this change coming for years. YEARS. They saw the evolution in social behaviors affecting the internet long before us common folk saw it. They just didn’t have the accounts to leverage it all (orkut has yet to take off here, and gmail isn’t massive enough in reach yet either), so they went to the 3-10th place networks and proposed a deal, that deal was OpenSocial.

There is an important thing to remember when it comes to these companies, they may give you something for free, but they are really making something from your data, so don’t feel bad for them.

What the next phase is:
Controlling the relationships and blowing them out to the entire web. Thats the central thesis behind the google friend connect, and the enabling of ajax api functionalities on facebook (that and the facebook friend connect thing too).  Once you amass enough users, and then tell the thousands of individual sites out there they can plugin your tool and become part of your network, you will have a massive amount of control over managing that network.

For those of you that have been following the teasers of Facebook’s redesign, the one coming july 15th, you might have noticed the shift to make it more like a desktop operating system interface (menu bar, footer/dock).  This is analagous to the concept they are working on to spread throughout the web. Why wouldn’t you install the facebook toolbar on your website if you could quickly and easily enable social relationships on a massive scale?  The quality of these relationships is important too, and that is where facebook has been trying to leverage its position as the social operating system. The Windows or OS X of your relationships.

So what can we expect?
Smart sites will foster this and try and grow with the two platforms, it won’t be easy, but they will be spectacularly worthwhile. Sites that don’t embrace it out of either fear or lack of technical knowledge will miss out while the smaller sites quickly grow past them. The sites that embrace these social levers will see the types of growth we saw on the initial facebook platform applications, but with the flexibility to grow their own loyal bases.

We will also start to see more emergence of open social graph standards spreading around like DiSO and others. Assuming developers can make these things idiot-proof, you’ll be able to move to any site and tap into your relationships wherever possible. The key there will be making them seamless to the user.

Ultimately this represents a major shift in how we design sites and develop their underlying concepts. The social “network” has become a feature or a commodity.

The last 2 days have been filled with talk about Yahoo, and why it is losing the race against google. I have what I think is the defacto reason. Period. No questions. Only answer. Ever. It all comes down to ad dollars. Let’s start with a bit of history first.

Yahoo started in this ad game in the mid 90s, before there was a critical mass on the internet as far as consumers and corporations. So Y! started by targeting the large ad buys on their properties. It only made sense to do it this way from Y! perspective, as they had the largest inventory, and didn’t have any other reasonable way of selling that inventory in a cost effective manner. So Yahoo focused on doing a couple hundred or thousand really big ad buys every year for big brand advertisers, Coke, Toyota, Nike, etc. These brand advertisers sustained the Y! bottom line quite well for years. Essentially Yahoo built itself a non-scalable sales channel, as every big name customer required a large amount of resources to support.

Conversely Google looked at the long tail approach, and realized that with such a massively varied inventory of pages to sell ads on they couldn’t do the same model of ads. They HAD to move towards a self-serve system, it was the only logical way. So with that in mind google went after the 5 Million small businesses and the long tail of advertising and hasn’t looked back since. It is much easier to sell 1 million ads at $5 a piece than 5 ads at $1 million a piece. By keeping the barrier to entry so low ($50), google has made it affordable and not risky for a small business unfamiliar with the web to try it out.

So fast forward to now, Yahoo has spent a lot of money on revamping their self-serve tools with Panama, but they have failed to expand their inventory. They could have done this by targeting publishers through their Adsense competitor ( but so far its limited in size, and very few sites support it or have been invited to join). Adsense contributed over $1.6B to Google’s bottomline in the last quarter, half that business and Yahoo could have been sitting in a different position right now.

So ultimately its up to Yahoo to step up their game. They aren’t down and out yet, they just need to realize what their assets are, and open them up. Once they improve their sales channel, and make it less dependent on brand advertisers, they can better monetize their search and their pages. Yahoo’s Achilles heel right now is its non-scalable ad sales channel. Remember, Yahoo still commands a huge % of internet traffic and is still a top-5 web destination.
I’ll be posting more on Y! in the coming days.

Disclosure: I own a limited amount of Y! stock.

So on this sunny monday afternoon, I figured I would share with you a couple of neat finds that I enjoyed for various reasons.

• Mark Cuban thinks google should buy its way into the music biz by paying off the record labels. - this would completely disrupt Apple and Microsoft’s Zune, or be a total flop, and no one would buy Google’s wares. But if they tied it into their smart phone that ran their mail, docs, etc. then maybe.
• David Sklansky - poker book author (I definitely recommend his poker theory book) - has posted a challenge to all christians who believe that jesus resurrected, and that non christians go to hell, that they cannot beat him in the SATs. He is betting $50k that they can’t win.