Facebook's success hasn't only netted its founders, early employees and investors billions of dollars, the world's largest social network has built an ecosystem that has served as the foundation for other businesses collectively worth billions.
From large social gaming companies like Zynga all the way to individual developers building Facebook apps out of their bedrooms, Facebook's launch of a development platform in 2006 proved to be a game-changer for online entrepreneurs.
The popularity and success of Facebook's development platform isn't all that surprising in hindsight. For the first time in internet history, arguably, entrepreneurs no longer had to worry about distribution; they could immediately tap into a network of millions upon millions of consumers. The challenge: build cool apps, scale them and monetize the usage.
Facebook's platform has matured considerably since 2006. In the early days, stories of indie developers pulling in five and six figures a month were common, and thanks to lax controls, it was easy for developers to use questionable and downright spammy techniques to promote app virality.
Today, the most successful apps are typically the product of large, well-funded companies that can invest in production and paid promotion. Even then, life isn't easy. Zynga, the 800-pound gorilla of social gaming, the most popular, lucrative and competitive app category on Facebook, is the perfect example of that. For a variety of reasons, the company's has seen its Facebook fortunes falter.
As a result, executives have fled and the company's stock price has been battered. Today, few disagree on one point: if Zynga is going to survive, its future isn't on Facebook, it's on mobile. Other prominent social gaming companies have come to the same conclusion.
Facebook looks to the future
The decline in the fortunes of social gaming companies like Zynga, and the widespread belief that the action in the social gaming space will increasingly be on mobile devices, not Facebook, should be of concern to Facebook.
Publicly, however, Facebook is looking to the future. It launched an app store experience last year, and now sees a new wave of app prosperity driven by activity in nascent areas. Speaking at the D: Dive Into Media conference yesterday, Facebook's VP of Partnerships, Dan Rose, told the audience that with categories like gaming and music dominated by companies like Zynga and Spotify, he expects apps built around movies, books and fitness to drive the next wave of app innovation.
Gold rush, or fool's gold rush?
As detailed by TechCrunch's Ryan Lawler, Facebook, which is working to forge partnerships with media companies serving those markets, is pitching partners on its ability to track and share the content users like. As Lawler explains, "That will help drive traffic back to services like Netflix. And by enabling users to share what they’re watching back to Facebook, the service creates a virtual cycle of connecting audiences with new types of content."
But is there reason for companies in underdeveloped categories to believe that there's any gold to be found in a new Facebook app gold rush? Or is Facebook's pitch based on fool's gold?
That many social gaming companies are de-emphasizing Facebook in favor of mobile is certainly reason for pause. And it's not the only one. Take, for instance, the Guardian. It launched a Facebook app in 2011. By March of last year, the Guardian was singing Facebook's praises. "It’s only a matter of time until social overtakes search for the Guardian," the news organization's director of digital development, Tanya Cordrey, told attendees at the Guardian Changing Media Submit.
But that was before Facebook made changes that sent usage of social reader apps, including the Guardian's, into a nosedive. In December, the Guardian pulled the plug on its reader app, which still apparently had millions of users at the time.
There's no such thing as a free lunch, or a free audience
The lesson Zynga, the Guardian and countless other companies have learned is that there's no such thing as a free audience. On Facebook, Facebook owns the audience and makes the rules, which it changes regularly. That's a dangerous combination.
Facebook would like companies that haven't yet jumped on the Facebook platform bandwagon -- companies in less developed app categories -- to believe that their participation in the Facebook ecosystem will be a net benefit to their businesses. And why wouldn't it be? Facebook has more than a billion members. But if history is any indication, companies will want to think carefully about how much they invest in building experiences on platforms they don't own.
More and more businesses, particularly those in B2B markets, understand the value of owning an audience, and while that doesn't mean that there isn't room for investment in third-party platforms, Facebook's pitch looks a lot less compelling today than it did in 2006.