Sunday, September 12, 2010

5 Reasons Apple could beat Facebook, and 5 Reasons They Won't

[In the interest of trying to do some better crystal ball gazing, I'm trying a new approach to posts where I try to put some rigor into both sides of an argument. I'll tag these as "TechWafflin"]

After Apple's announcement of Ping at their recent love-fest, a number of pundits were quick to claim a war was brewing where Jobs would take on Facebook. Others were equally quick to claim that this wasn't the case, or that if it was Apple would fail.

The most commonly cited reason for the pro-FB sentiment was "Facebook is too big to be beat" (due to critical mass, revenue, momentum, ecosystem, etc). It burns me when people take this position. Yes, Facebook has these advantages, but saying that FB can't be beat is ridiculous. How many times have we heard someone was too big to beat only to have them, well, be beat? AOL, Yahoo, Everquest, Myspace, IBM... people used to say this about General Motors, and years later they needed a taxpayer funded defibrillator.

Anyhow, the fatalist attitude aside, Facebook's momentum and entrenchment are indeed a factor. My previous thinking was that they'd be beat by an entrant quietly addressing a niche with a better product and growing up from under them.

However, the Apple entry got me thinking and I beleive they have a few factors that mean they in fact could take on Facebook and give them a run for their money. Here are five reasons I think that's the case.

5 Reasons Apple could beat Facebook

  1. Apple has ~150M iTunes users and can piggyback a social network into that installed base with an iTunes update. Also, they could offer any number of incentives to connect with friends.
  2. The relationship Apple has with those 150M people is already a trusted and trained relationship with a tie to content people care about (music, movies, games...). Another way to think about this is that the majority of those 150M people have asked Apple to keep their credit card numbers on file.
  3. The iTunes economy may be bigger than the Facebook economy. Not sure about ad revenue on both side, but one way people should be looking at #1 above is asking ($150 iTunes users * Avg User Yearly iTunes Spend) > (500M FB users * Avg User Yearly FB Spend).
  4. Apple has a warchest of $40B. Yes, FB has real revenue and it's estimated to be as high as $2B for 2010, but at the same time, Apple made in excess of that number every two weeks through the last quarter.
  5. Apple has a better relationship and level of interest with the developer community. Neither platform has been perfect, but Apple's been improving their policies over time, where FB's recent gaffs seem to show developer satisfaction is pretty low on their list.
OK, now taking the other side...

Again, most people cite Facebook momentum. A factor, but not a given. Top most argument for me is that Apple seem to be doing fine screwing this up for themselves before FB need bother respond. Anyhow, here are five reasons Apple won't topple FB:

  1. Ping is shop-centric instead of user-centric. Too much thinking around "how can people help other people BUY", not just "how can people connect and share".
  2. Not considering FB's shortcomings: It seems Apple's being a bit lazy, and is launching Ping as nothing more than "its a SN, connected to iTunes". They don't have to look far to find a list of things they could actually do BETTER than FB. Better privacy policy, developer platform or policy, relationship control, or as I've talked about, tracking relationships as nouns rather than adjectives.
  3. Arrogance. Just as FB's arrogance could be their downfall, Apple's arrogance could be their guarantee of failure. Saying things like "Privacy is easy", are a clear indicator that they either don't take it seriously or haven't thought about it. Allowing users to view, grok, control, and evolve the exposure of information and content over their entire network is a really hard problem that is not going to get easier.
  4. Closed Ecosystem mentality (vs open). It's on their software, their devices and adding features as they see fit. As opposed to a liberal policy embracing 3rd party platform vendors to accelerate your platforms development.
  5. Fragmented effort from Apple. To me it seems that simultaneously launching Ping while also launching Game Center is indicative of a fragmented strategy at best, or a complete lack of one at worst. Ideally (for them anyway) Apple would have a SN for their iTunes platform, and then all activity over your SN could be tapped by their music services, game services, etc. Instead we have two different systems?
Looking at the latter list, it doesn't bode well for Apple's attempt. Still Zuckerberg would do well to adopt Andy Grove's mantra, "Only the Paranoid Survive". Apple is a well-armed, credible contender that has bellied up to the bar - it's now just a question of whether it came in looking for a fight.