Wednesday Jan 21, 2009

Outline of a business model for open distributed social networks

illustration of SN data silos by the Economist

The organisers of the W3C Workshop on the future of social networking had the inspiration to include a track on Business Models. What would be the interest of large players to open up? to play ball in a larger ecosystem of social networks? What would the business model be for new entrants? This question clearly was on many of the attendees minds, and it is one I keep coming across.

First without Linked Social Networks there are a lot of disincentives to create new web services. This is because users of these services need to duplicate the data they have already created elsewhere, and also because the network effect of the data they are using is bound to be much smaller. I have found myself uninterested in trying out many new web 2.0 offerings for just these reasons. It is much more rewarding for developers to create applications for the Facebook platform for example, where the users just need to click a button to try out the application on the data they are already using, and that may yet enrich this data further.

Open Secure Linked Social Networks, such as that made possible by foaf+ssl, give one the benefits enjoyed by application developers of the closed social networks but in a distributed space, which should allow the unleashing of a huge amount of energy. Good for the consumer. But good for the big network players? I will argue that they need consider the opportunities this is opening up.

First of all one should notice that the network effect applies just as much to the big players as to the small ones. A growing distributed social network (SN) is a tide that will lift all boats, and since metcalf's law states that the value of the network grows exponentially with the number of nodes in it, then doubling the number of nodes in the network may just quadruple the value of the network to all. Perhaps the big operators are thinking that they control such a large slice of the market that there is not much doubling that they can do by linking to the smaller players. As it happens most social networks are geographical monopolies, which would go to strengthen that point of view (see slide 8 of the opening presentation at the W3C workshop). [ Nothing stays still, and everyone should watch out for the potential SN controlled by the telecoms.]

But the network effect applies to the big players also in another way. Namely that if they wish to create small networks then the value of those networks will be just as insignificant as those of other smaller players. So let me take a simple example of very valuable smaller networks which have a huge and unsatisfied demand for social networking technologies and the money to pay for tools that could help them quench their need: companies! Companies need to connect their employees to their managers and colleagues inside the same company, to knowledge resources, to paychecks and many other internal resources such as wikis, blogs, etc... Usually companies of a large enough size have software to deal with these. But even in a company such as Sun Microsystems, that is relatively large, the network effect of that information is not interesting enough for people to participate gladly in keeping the information up to date. I often find it easier to go to Facebook to find a picture of someone in Sun. Why? Well there is a very large value in adding one's picture to facebook: 200 million other users to connect to. In Sun Microsystems only 34 thousand people to connect to, and it is true a financial incentive. Clearly the value of 200 million squared is larger than the incentive of being efficient at work.

One thing is clear: it is impossible to imagine that such large software companies can allow their employees to just use the closed SN sites directly to do their work - I mean here: have all their employess just use the tools on for example. This would give those SN companies way too much insight into the dealings of the company. Certainly very large sections of industry, including defence contractors, large competitive industries such as car manufacturers, and governments, cannot legally and strategically permit such outsourcing to happen, even though the value of the information in such a large network would be astronomically larger. In some case there are serious privacy and security issues that just cannot be ignored however attractive the value calculation is.

So large SN players would have to enter the Fortune 1000 with Social Networking software that did not leak information. But in that case they won't be in any seriously better position than the software that is already in there, and they won't be able to compete any better than any of the smaller companies that are working in this space, as they will not find it easy to leverage their main advantage, namely the network effect of their core offering.

And even if they did manage to leverage this in some ways, they would find it impossible to leverage that advantage in the ways that really count. Companies don't just want their employees to link up with their colleagues, they need them to link up with people outside their company, be it customers, government agencies, researchers, competitors, external contractors, local governement, insurance or health agencies, etc, etc..... The list is huge. So even if a large Social Network could convince one of these players of the advantage of their offering, they will never be able to convince every single partner of that company - for that would be to convince the whole world. Companies really want global SN, and that is what Emergency Response teams really need.

To make such a globaly linkable platfrom a reality one needs to build at the level of abstraction and clarity at which the only such global network in existence is built: the web itself. By using Linked Data one can create distributed social networks where each player can maintain the information they feel the business need to maintain. With the very simple foaf+ssl protocol we have the lightest possible means to build security into a distributed social network. Simplicity and clarity - mathematical clarity - is essential when developing something that is to grow to a global scale.

Companies therefore that work at providing tools for distributed social networks, will if they play well together, find a huge opportunity opening up in front of them in helping enterprises in every industry segment link up their employees to people in every walk of life.




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