The Bankwatch

Tracking the consumer evolution of financial services

Could FaceBook risk becoming another AOL?

I have been trying to digest the implications of FaceBooks announcement yesterday about becoming the “social operating system” for the Internet, to quote 23-year-old chief executive, Mark Zuckerberg.

When I looked closer at FaceBooks new positioning today, they have portrayed everything as an application, groups, photo’s, events, and now, LendingClub, as reported earlier.

Then I was reading Brad Stones review of FaceBooks plans, and this little quote leapt off the page at me.

Facebook hopes that thousands of outside companies will eventually build features for its site. One inevitable drawback is that Facebook pages will no longer all look the same. To preserve some of its uniformity, the company is asking developers to stay within certain lines — for example, preventing images from blinking or music from automatically playing on a Facebook page unless clicked on.

Source: NY TImes

Here is my take. Using LendingClub as an example, the first few pages were on FaceBook, coded in their look and feel. Then when you want to do something, lend or borrow in this instance, you are off to LendingClub.com and into their look at feel completely, with no similarity to Facebook.

This is highly reminiscent of AOL in the 90’s What killed that model was the openness of internet, and the restrictive AOL which wanted to keep people within their world as much as possible, just became too restricitive for most people. I recall advertising arrangements with AOL, and the rules with which we had to comply, using their specialised hmtl markup. Only after running through a few pages within AOL, were we allowed to link out to our site.

Certainly one difference I would assume is the development time and methods are faster and more standardised than with AOL, but the restrictiveness in terms of how to get to LendingClub, which you can only reach from within Facebook, is an untested factor. This issue will be amplified if the social networks participants reason for being in FaceBook is in conflict with something like lending. Perhaps the nature of my lending needs, is not something I want to share with my Facebook friends, even though I want to participate in social lending. Lots of questions.

Time will tell.

Written by Colin Henderson

May 25, 2007 at 13:19

Posted in Social networks

6 Responses

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  1. Hi, I’m the CTO of Lending Club. I just wanted to clarify that the integration with facebook is not only about the UI touch points. That is just scratching the surface. It’s really all about the exchange of data and the ability to create new computational models that apply to social networks. For example, our proprietary LendingMatch(R) algorithm, computes and generates optimal (with respect to a risk level) fully diversified loan portfolios that also take into consideration the “connections” between the lender and the borrowers. In the case of facebooks these connections are obtain through querying their back-end on information about groups and (mostly authenticated) networks which include workplace, schools/colleges, etc. This makes total sense as trust and peer pressure, the primary barrier to social/P2P lending, can now be modeled leveraging the power of the network. I’m sure you will see other social networks moving towards this concept of enabling social applications pretty soon. We would love to hear from you as Lending Club is interested in expanding its reach beyond facebook.

    Joaquin Delgado

    May 25, 2007 at 15:51

  2. Colin, to build upon Joaquin’s comment, I would just add emphasis that the value in the integration is using the assets available in Facebook and not just using it as a portal for links. Facebook has an immense social network established with built in information on all its users. New useful and sustainable applications on this platform will utilize these assets (such as a trust network) that would be very difficult to replicate elsewhere.

    No other application (and I have been on a lot) has been able to build such an extensive database of all my connections/contacts with such little effort in such a short period.

    People left AOL because there was everything they used and more outside the wall. There are things inside the Facebook wall that are not currently available elsewhere, that is the difference. I think there is far greater risk in another social network displacing it than openness.

    Kurt Gooden

    May 25, 2007 at 17:56

  3. Thanks for the comments, from both of you. I agree success will be derived from the value seen by the users, and it will be fascinating to watch this evolve.

    Colin

    May 25, 2007 at 18:39

  4. […] What bothers me about the Facebook F8 aproach is the move towards propietariness (is that a word). Hence my AOL post. […]

  5. […] while back I posted the thought that FaceBook looks like the old AOL.  The catalyst for that thought at the time, […]

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