And what do you think of it? Do you think this is true or false?
When I wrote a post a month ago detailing why I thought Facebook could really hurt Google, lots of readers scoffed at my logic. So I was relieved to see that Sean Parker agrees with me. Parker, a babyfaced wunderkind tech enterpreneur, played key early roles in Facebook and, before that, music filesharing site Napster. He gave the most provocative presentation at the Web 2.0 Summit in San Francisco last week — laying out, in broad brushstrokes, how and why he thinks Facebook will kill Google.
Parker believes, in short, that businesses that connect people are worth more than businesses that collect data. Google collects data; Facebook connects people. So network effects will go to Facebook, and not Google.
“Network effects”? Think of the term this way: With every additional member who joins Facebook, the value of Facebook increases to everyone who uses it. Each node on the network brings additional information and additional capabilities. The classic example of this phenomenon, known as Metcalfe’s Law, is the fax machine: a worthless device until a critical mass of consumers had them and could make faxing common practice. In an earlier era, the success of the telephone was similarly dependent on the size of the network.
Parker argues that network effects work on the Internet as well. He cites PayPal, eBay, and Skype as network-effects businesses that facilitate connections between users, rather than collecting or sorting information.
Still, none of them have come close to either the revenues or usage of Google. So why would Google fear Facebook?
Two reasons. One, because any given user’s switching cost from one search engine to another is close to zero. Google has a great product, but the entire world could switch to Microsoft’s Bing search engine in a split-second with little consequence. But Facebook has insanely high switching costs. After you’ve built a network of friends, uploaded pictures, and used Facebook Connect to sign up for dozens of other sites, the idea of ditching it all for some new service is quite painful.
This is precisely why, even after Google came out with Gmail and a much higher amount of free memory, Yahoo! did not see a significant exodus from its own online email service. Yahoo offered less than Google, but switching from one email provider to another has extremely high costs to users, who loathe the idea of exporting emails, sifting through emails, organizing emails, and praying they haven’t deleted emails. But switching from Google’s search engine to Yahoo’s is neither difficult nor particularly painful.
Another reason to fear Facebook is that search is increasingly a social act. When my wife and I were searching for a new pediatrician, I did a Google search and a Facebook inquiry. Google brought up a bunch of links on sites of varying quality that purported to rank physicians — fair enough — but my Facebook query got me some excellent recommendations from people I knew. I was more comfortable with Facebook’s suggestions, because they came from people I knew, at least tangentially, and because I knew the information was relatively current. A Google search gives no guarantee of whether the information is current, nor of the motivations behind the strangers who provide it.
