DID FACEBOOK UNDERESTIMATE THE PLATFORM'S SUCCESS?
SECOND UPDATE: Check the end of this post for some more information from Facebook and ViddYou. — I think most of the Web has reached the consensus that Facebook Platform, the social networking site's new initiative to open up its service …
Context & Ripple Effects
Three weeks after framing itself as the social Web utility company at the f5 conference, Facebook is confronting what that ambition actually costs. The confirmed relationships describe a 'hardware stuff-up': the company did not provision enough servers for the demand created when it opened Facebook Platform to outside developers in late May 2007.
The fix has an ownership price — confirmed reporting says Facebook's owners had to sell a significant share, diluting their holding by roughly 10 percent, to fund the expansion. Meanwhile the company is already wiring monetization into the platform, launching a Polls product in early June positioned as an advertising offering alongside the existing Ads navigation.
First-order effects
- Developers who rushed applications onto Facebook Platform after the late-May launch are competing for capacity on a server fleet the company admits it underbought, making Facebook's own infrastructure planning an immediate dependency for every third-party app.
Second-order effects
- With equity diluted about 10 percent to cover hardware, Facebook has a sharpened incentive to convert platform activity into revenue quickly — which is exactly what the Polls-as-advertising launch next to the Ads nav suggests, effectively asking its developer ecosystem's audience to help pay for the servers their apps strained.
- Any rival social network watching this now knows that opening a platform means budgeting infrastructure ahead of unpredictable developer demand, raising the cost of copying Facebook's open-apps move.
Third-order effects
- If the pattern holds, successful social platforms converge on the utility model Facebook claimed in May 2007 — but with a structural catch: the more indispensable they become to outside developers, the more their growth forces early dilution and aggressive monetization, embedding commercial pressure into the platform layer itself.
The trend: Social networks are becoming application platforms whose infrastructure bills and equity costs scale with developer adoption, forcing even fast-growing consumer sites to think like utility operators.