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Bloomberg Customers Future Ghost Town?

Posted by: Douglas Macmillan on April 27, 2009

On Monday, the world’s largest social networking site opened parts of its code to the public. Now, third-party developers can build Facebook applications that will let users post status updates, share pictures and links, and interact with most other elements of the site without ever visiting Apparently, the company is prepared to lose gobs of traffic and, in turn, revenue from display ads on the site.

Using the new Facebook Open Stream API, hundreds of software developers are likely to build thousands of different Web sites, desktop clients, and mobile apps that will function as personalized windows into the Facebook universe. Hardcore users will get a real-time feed of status updates from their friends; photo-lovers will find new ways to tag and geo-locate images; news hounds will be able to see a list of the most popular articles shared amongst their friends. “You’re going to see people creating a lot of different means of interacting with what is ultimately this incredible engine of communication which is Facebook,” says Mashery’s Oren Michels, who has helped companies like Best Buy open their own platforms to third-party developers.

Sound familiar, Twitter users? An open platform for most of its three-year history, the popular microblogging service has cultivated a colorful ecosystem of third-party applications, from desktop program Tweetdeck to investor community StockTwits. With so many great apps available to them, Twitter users now post messages using these services with greater frequency – 55%, according to one estimate – than they do on the site itself.

Outsourcing so much traffic may work for Twitter, a company which has hinted it doesn’t intend to base its business on ads placed on its home page. But at Facebook, display ads on the home page make up a bulk of the $300 million the company is projected to take in this year. If a slice of the site’s 200 million active users start relying on some third-party app rather than visiting, revenues could take a hit.

Ethan Beard, Facebook’s director of platform marketing, disagrees. “What this will do is increase the amount of sharing, and give [users] the control and ability to share anywhere,” he says. An overall increase in the amount of sharing, he argues, will drive more visits to the home page and user profiles. “That drives advertising,” he adds.

But reading into what Facebook executives have said about the future of advertising on the social network, it appears that the company is planning to replace the revenues it will lose from banner ads with a new type of revenue: in-stream ads, which would appear alongside status updates and other “news stories,” even on third-party apps. “I think that’s their plan,” says Loic Le Meur, the entrepreneur behind Seesmic Desktop – the first application to take advantage of the Facebook Open Stream API. He adds that this is his personal belief, and not based on inside discussions with the company. (David Swain, a Facebook spokesman, says “we have no current plans” for pushing ads to third-party apps.)

During her recent visit to New York, Facebook COO Sheryl Sandberg told attendees of the AdAge Digital conference that banner ads “interrupt your experience,” and shared with BusinessWeek editor-in-chief Stephen Adler that text ads “are really part of the search experience.” While the social network does carry both banner and text ads, the company has recently experimented with campaigns from Honda and Ben & Jerry’s, which saw users voluntarily interacting with those brands and posting “news stories” about them in their activity streams. “So the advertising experience itself is very integrated into the Facebook experience,” Sandberg told Adler.

For the reasons Sandberg outlines, in-stream ads are intriguing – even more so if they could be pushed to a network of hundreds of Facebook applications. But is there any market for them? eMarketer senior analyst Debra Aho Williamson is doubtful. “If Facebook is smart, it’s going to make sure there are ways to keep people coming back to the site,” she says. Williamson suggest that the company could find other ways to profit from outside developers, such as charging them a fee or allowing marketers to search and analyze conversations happening on their applications.

It may take a year or more for third-party applications to siphon off a significant portion of Facebook traffic. And by that time, advertisers may be keener on experimenting with in-stream ads.

Then again, the site may not have so much time before third-party apps come into their own: Only hours after Facebook announced the Open Stream API, four Twitter developers told me they were already thinking about how they can use the Facebook code, including the makers of Tipjoy, Twittervision,, and

Reader Comments


April 28, 2009 2:35 AM

Exactly who gives a f**k?


April 28, 2009 4:03 AM

"Williamson suggest that the company could find other ways to profit from outside developers, such as charging them a fee or allowing marketers to search and analyze conversations happening on their applications."

Yes, they are that evil. Remember this FB users: "All your post are belong to us!" If you think there are privacy concerns with Facebook, try keeping the thousands of application developers in line. Or, just admit that once you post something on FB it's out there for all to see and use as they see fit.


April 28, 2009 7:07 AM

The real scoop in this story is that the banner ads on the Facebook site are actually relevant enough to anyone that people bother clicking on them. $300 million? Who ARE these people?


April 28, 2009 7:07 AM

The real scoop in this story is that the banner ads on the Facebook site are actually relevant enough to anyone that people bother clicking on them. $300 million? Who ARE these people?


April 28, 2009 7:45 AM

Maybe it's because I'm an introvert and closely guard my private life (such as it is while Big Brother's watching), but I don't get why people feel the need to expose themselves and their families, complete with personal photos to strangers all over the Internet for all to see, scrutinize and comment upon. Social "networking" used to be done in person when one enjoyed the company of friends and family, before the era of electronic wizardry and gadgets that consume and preoccupy, allowing for a few words to "twitter" or "facebook" to let our friends and loved ones know we still exist. How socially detracted and cold we've become, resorting to electronic communications and text-messaging, leaving no time for human contact or interaction. We much prefer to post our opinions on critical issues anonymously using safer, fictious names rather than take the time to discuss and solve the world's problems like we once did, face-to-face around the family table.


April 28, 2009 8:52 AM

Can you say Sounds like Facebook is just trying to catch up with ning.


April 28, 2009 9:11 AM

There was already a way to do all this. The facebook chat plugin for pidgin can receive notifications from the website, let you chage your status, and let you view your friends, all their statuses, and give you the ability to message them, all within the Pidgin IM client.

I've also seen plenty of widgets/gadgets that retrieve info from facebook (like the number of notifications or messages you received). You can also read every wall post or mail you receive in Facebook from within your email client if you set up facebook to send notifications to your inbox.

My point: There were already ways to do most of what the APIs will simply make easier. Is GMail unprofitable because you can use Thunderbird/Outlook and never see an ad? No.

There are enough people who, even with a completely dedicated and feature rich client available, will still use the web site. Sometimes you'll be at a library or a web cafe where installing a client is not an option.


April 28, 2009 10:04 AM

Basically Gettysburg12, for a fair number of us those "close friends and family" were only close because they were "close", ie, in physical proximity to us. Personally I only like one member of my family, and I live in a place with a lot of redneck hicks (and I'm not one). There's nothing wrong with being a redneck hick (well...), but it does mean that I'm surrounded by people that I have no affinity for, and whose interests I don't care about (country music, guns, and football, bah).

Now if you happen to be lucky enough to be surrounded by people exactly like you, both in friends and in coworkers, then sure, you don't need to branch out.

But for those of us who aren't that lucky, those who aren't in the strong majority in their area, various social networking options allow us to communicate with people just like us, people who we'd never have had a chance to talk to otherwise.


April 28, 2009 10:20 AM

To Gettysburg 12 -

Beautifully Said. I absolutely and completely agree with you.

I also note how pathetic people have become to think that the world revolves around their fictitious and anonymous MySpace/Twitter/Facebook "Friends"....

You hit it dead-on Getty...Bravo.


April 28, 2009 10:45 AM

No, I don't understand why people love to tell strangers about them. There are so many things happening in this world especially, with people dealing with the internet posting themselves online like its okay.


April 28, 2009 10:46 AM

The government loves social networking. They don't even have to spy to spy anymore. We're feeding it to them by the bucket full. A couple of coders in a room with a few rich APIs and viola...a rich map of the next generation to view and test the next great propaganda scheme.

John Bailo

April 28, 2009 11:16 AM

All facebook proves is that if you give people free stuff...they'll take it.

But is that business? Yeah, they get advertisers, but like Google, only because their burn rate (of people not getting any sales) can continue for years before someone calls their bet.


April 28, 2009 11:26 AM

Try to ask a complete stranger you find on the street to tell you what's his job, to see a picture of his family or what he had for dinner, you'll get a "who the f||ck are?, but go to any "social sites" and you find the deepest sh1t about the same kind of people!

Social my azz!
We're doomed.


April 28, 2009 11:31 AM

@gettysburg12 and his supporter.

In a way I agree with you, but what you say does not apply to all. I moved more times than I care to count; each time making friends. Only because I moved it does not mean that I want to stop being friends or keep in contact. Platforms such as FB allow me to easily keep in touch with all my geographically distant friends and family.

FB supports privacy mechanisms to configure who gets access to your family pictures and other private information. So, learn about technology before you make a general comments.

However, I will feel cheated if the profile security issues will be violated in the background by allowing access of the private information to 3rd party. Whatever information I deem as public, they can have access to.

Facebook will soon be irrelevant

April 28, 2009 11:57 AM

I think that Facebook is going to have other more serious issues. I'm 40 and on Facebook. I suspect that my kids are not going to want to be on the same social networking site that I am on because, lets face it, their kids and I'm their parent. Likewise, most of my recent friend requests are from people in the 55 and up generation - my parents' generation. Even though I'm 40, I don't know that I want to be on the same social networking site and be "friends" with my in-laws. I expect that the next generation of kids are going to be on to the next big thing before long and that will be the beginning of the end for Facebook's relevance.


April 28, 2009 11:59 AM

Jesus, Gettysburg, welcome to every CNN story in 2004. You really have no idea how an online social network functions because you've never used one. It's just another way to interact, and it's a great way to share items like pictures and movies with people you know all over the world. I went on a trip to Peru, met people there and took pictures and video with them, now I can tag them on my facebook and everyone involved, and my other friends, can check out how much fun we had.

We (obviously) live in a different time, but that doesn't mean interacting over the internet (with people you know in real life, not anonymous AVATARS) happens alongside physical interaction. To suggest the worlds problems are shouted back and forth across the magical wizardry of tubes and confusion rather than talked about in person is...just stupid.

Also..can you please tell me exactly how the superevilgovernmentbigbrothermachine monitors my Facebook page? grow up.

For GETSIT to suggest that every user's world revolves around fake and anonymous avatars is incredibly misinformed.


April 28, 2009 12:00 PM

To the Gettysburgers - Facebook and MySpace are NOT the same thing. You can't see everything about a person on Facebook unless they let you. Most do NOT make their profiles public for all the world to see. And most people use their real names because they WANT TO CONNECT with others, namely long lost friends and colleagues. Since joining I have been contacted by and contacted people I've missed and wondered about for years, but had lost touch with having moved thousands of miles away from home over 20 years ago. While MySpace is kind of creepy and junky, I've found facebook to be the closest thing to walking into a room full of my friends that I can experience without buying several plane tickets and taking a few weeks off from work. Especially when friends are all over the country. In person would be great, but I'll take what I can get for now. It's a joy to share photos, both past and present, to see each others kids and families, etc. I couldn't have found many of these people without paying a service to do so, but on Facebook it's free. You should probably try something before you make a blanket statement about it or else you end up looking rather foolish.


April 28, 2009 12:09 PM

I couldn't disagree with gettysburg12's comments more! Facebook has enabled me to find friends that I have been searching for without success for 35 years+. 4 within the last week alone. Our church has a Facebook group, and not only has it made our members more well-informed about church activities, it has enabled the group members to learn more about people that they already "sort of" knew. We all knew each other only as fellow congregants, maybe knew a few things about personal interests and the like. Now, due to the members posting information about themselves, each choosing how much to reveal individually, we have learned much more about them as people - their favorite books, music and movies, photos from their vacations, which schools they went too, etc. etc. This alone has greatly enriched our direct, face-to-face relationships. Far from encouraging us to stay inside and react only online, it has motivated us to do more things together and in person. The only Facebook friends of mine which exist as online-only contacts are those that are geographically too far away to make personal, daily contact possible. And even with those far-flung friends, I now have personal contacts in places that I may travel to. (I've known them for a long time actually, now I just know where they are.) I know that if I'm driving thru Chicago, I can stay at my cousin's place - he isn't living in San Francisco like he was the last time I saw him 10 years ago. I've got old friends whose couches I can crash on from San Diego to Maine, and many places in between.
Facebook is what you let it be. If you reveal stupid things about yourself, then all your friends will know how stupid you are. If you pay no attention to your security settings, then anyone who wants to find out things about your personal life will be able to, providing that you are stupid enough to reveal them. There are probably many younger users who don't take the kind of care about their FB activity that they should. That's their problem. I am responsible, I ensure that my kids are responsible, and I encourage my friends to be responsible while on FB. It is very very far from Orwell's dystopia.


April 28, 2009 12:10 PM

Is Gettysburg12 your first, middle or last name? I hope I have made my point. You are participating in what you said that you hate. You are participating in social media by leaving a comment....especially at 7:45AM. Throw away your cell phone then and only call people on pay phones on the street if you don't like technology.

"We much prefer to post our opinions on critical issues anonymously using safer, fictious names rather than take the time to discuss and solve the world's problems like we once did, face-to-face around the family table."

Both Sides

April 28, 2009 12:12 PM

To hit it dead on....gees when I saw this article I had to read it...thought I wasnt fully awake! Reading your input... I realized I WAS awake...We can already do these things.. so, whats the new news? There isn't any... Gettysburg... try sitting face to face when family is 3,000 - 10,000 miles away from each other. There some benefits as there are some hazards... people just have to use their brains.


April 28, 2009 12:23 PM

With technology and communication within social networking at the stageit isat and headed towards the Pandora's box scenario - "all evil contained escaped and spread over the earth" and no matter how much we wish it I do not believe we will get people-to-people activities back to previous levels. The "glass is half full view" - at least "She hastened to close the lid, but the whole contents of the jar had escaped, except for one thing which lay at the bottom, and that was Hope." Dare we - hope?


April 28, 2009 1:28 PM

Sv said exactly what I wanted to say but better.


April 28, 2009 2:02 PM

How does Facebook watch you?

To Ian, re: para3

April 28, 2009 2:04 PM


April 28, 2009 2:10 PM

My neighbors know about Twitter, not because of but because of the countless ways to use Twitter. I think this is a good move for FaceBook, it will extend their reach beyond their own .com and open new channels.


April 28, 2009 2:25 PM

"All in all, the creative act is not performed by the artist alone; the spectator brings the work in contact with the external world by deciphering and interpreting its inner qualifications and thus adds his contribution to the creative act. This becomes even more obvious when posterity gives its final verdict and sometimes rehabilitates forgotten artists."

- Marcel Duchamp


April 28, 2009 2:52 PM

I'm fairly new to facebook and finally gave in to some relatives. Right now all my "friends" are immediate family members along with a few very close friends. My purpose, along with them, to remain in closer contact (since none of live hear each other anymore), and share some photos. It was not meant for the whole dang world to access.


April 28, 2009 3:32 PM

To Ian,

Bravo. Couldn't have said it better myself! IMO, the people who denounce SM venues like Twitter, FB, et al. are the very people who have no flipping idea AT ALL how to use them. As you say, it's about engagement, about all "borders" being cross-able and geography becoming meaningless and about being able to interact, learn from, do business with and enjoy people from all walks of life and all over the world. Change is what our world is all about - always has been and always will be. Thus, our respective abilities to understand change, find the good in it and, ultimately adapt to it will ultimately contribute to our overall happiness in our "real" worlds as well as in our business and professional lives.

I have friends - not faceless, anonymous avatars - from all over the world, whom I engage with on a daily basis via Twitter, FB and other social networking tools and they do, truly, enrich my life. And I won't even mention what those relationships do for my business - I'm busier, and happier, and making more money as a result of my involvement in social networking ... oh wait, I wasn't going to mention that (hehe). That said, I also am fortunate enough to have terrific family, friends, business associates, etc., who are nearby and with whom I interact face-to-face on a daily basis. And man, do I have it all!

Ian -- you've got it my friend. Now, let's connect on Twitter :)



April 28, 2009 4:06 PM

Walker: A little misconception there: Pandora didn't accidentally keep hope inside the box. Instead she managed to slam the lid shut in time to keep the worst monster of all locked inside: false hope (also known as "hope without logic or reason", or "faith").

False hope destroys societies and brings civilizations to their knees, through stagnation and mindlessness. That was why that was such an important thing in the story. In the framework of the legend, without that action by Pandora humanity would have been doomed to a menial existence of meaningless daydreams and pointless faith in things that didn't exist, while never being able to accept reality for what it was, and thus never progressing.

It's an oddly anti-religious myth when you think about it.


April 28, 2009 4:28 PM

facebook and twitter are just fads. look at friendster now.


April 28, 2009 7:39 PM

At this point the conversation became more interesting than the article itself. However it was an expected impetus for the discussion that followed. The truth of the matter is that technology has its benefits and its pitfalls. I think that a more dangerous privacy security is posed by Credit Cards and cellphones, which leave a paper trail that is vivid and equally accessible to any interested party. A picture of my family on FB presents a minimal danger in comparison. Perhaps you are a purist such as Getty or a tech-y like myself, regardless we end up using technology in which we are not expert to. It is important not to be blindsided and be educated about how technology affects us and what are the potential exploits resulting from us using it. FB is not a charity organization and I don't see basis for being angry with them for trying to make profit. It is the responsibility of its users to be vigilant and protective of their private information no matter the technology in question.

Warren Bonesteel

April 28, 2009 8:26 PM

A tool used by an evil man can create despair and chaos. The same tool when used by a good man creates hope and is productive.

Just remember folks, wherever ya go, there ya are.

You create the world you live in.


April 28, 2009 10:23 PM

Nothing new, everyone must open and share.

April 29, 2009 12:38 AM

I appreciate the information on you blog as I am always looking to learn new things in general


April 29, 2009 3:00 AM

It's not hard to see some stuff from private profiles if you're determined. Just find someone with a public profile, and every time you view something of theirs, Top friends, Super Wall, Reputation etc... (whatever, pick one of the applications) Whenever you see the persons ID number in the url (that 9 or 10 digit number) try swapping it with a private persons number. If the private person has the same app installed all their stuff relating to that app will show up. It doesn't work for every application but it does for some. Also, install the app called Photo Stalker. This seriously lets you view private peoples photos if they haven't tightened up their privacy settings. Now when a person makes their profile private you'd think they'd assume they were, well, private and not have to fine tune settings for different parts. I can't believe it's a legitimate application. I'm surprised Brian Ng or whoever he is hasn't busted in and claimed the fame of 'discovering' the privacy breach.


April 29, 2009 6:02 PM

Facebook is what you make of it. You don't have to post every bloody detail of your life. You don't have to post a picture. You don't have to engage in activities that you do not want to participate in. It's a choice. Perhaps for some, the right choice is to jump in and make the most of it. For others, it may be something they care much about or for. If you don't like Facebook, then don't use it. And if you do like Facebook, may you enjoy it in good health and have fun too. Just remember, once you post something anywhere, it is unlikley to remain private for very long. Pictures and text can be easily copied, and even posted somewhere else, so my only advice would be to think hard about whatever it is you are posting -- don't let it be something that could be used against you. Hiring managers, college admissions officials and others are watching on Facebook and other social media sites using them for bacjground checks.

Sawant Shah

May 1, 2009 4:25 AM

The premise that Facebook is going to end up as a ghost town (with less people going to Facebook) just because FB has opened up most of its application via APIs is a far-fetched concept. Applications - both desktop and web - have gained tremendous advantages by opening up their API.

I prefer going to to check my emeails than to POP them in Outlook. Why? Because I find it much easier to manage my emails in Gmail.

Similarly, Facebook's interface is one of the biggest selling factors. The instant gratification/feedback mechanism that they have put in to their interface is the best out there provided by any application (desktop applications included).

Also, keep in mind that desktop applications tend to eat up lots of memory/RAM! I am using Tweetdeck to post Tweets and its memory footprint is way over 100 MB on average ... going up to ~200 MB!

Facebook's Open API is going to bring in more users to Facebook ... more 'active' users, more data to aggregate. All in all, its a winner for Facebook. And so it is for the application developers as well.

Jimmy from Chicago

May 28, 2009 12:26 PM

I just cancelled my Facebook account after four months of use.

The reason? Easy. I have failed to find the value in knowing and sharing the mundane happenings of everyday life (from my life and those of others).

This holds especially true for most FB "friends" who are people from my distant past or extended, non-close family.

Also, for my closest, real friends, I can still share photos via Flickr and videos via YouTube. Oh yeah, then there is good ole fashioned calling or real, facetime for "connecting."

For these reasons, I really see FB as a passing fad.

On a side note, I have never clicked on the sidebar ads and very rarely even look at them. So, the advertising value may ultimately be very little when actual ROI numbers are watched over time.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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