Friday, February 17, 2012

Facebook conquering entertainment grounds

Facebook’s latest joint adventures with Spotify and Netflix are signaling a significant expansion of Facebook’s domain, improving the strength of Facebook to a greater extend than its collaborators. This tendency might lead to ad-auctions-like promotion of Facebook posts.

Nowadays Facebook has grown way beyond just social network. Gaming, promotion of e.g. artists etc. are becoming an increasingly larger part of the activities and Facebook is trying to take over communications by integrating email compatibility into its messaging feature.
Recently Facebook have been taking steps into the entertainment business, trying to combine it with the possibilities of the social network. The goal is to mimic a movie night or the shared experience of music while hanging out and chatting, in an effort to let the online experience embrace more and more aspects of the real life.
Earlier in 2011 Facebook joint forces with the rising start of streaming Spotify which now require a Facebook account for login in order to ease sharing of playlist etc. In September Netflix announced they too are beginning to cooperate with Facebook, though the US launch is delayed by legal issues [1] [2]. The alliance with Netflix is interesting, since they have tried once before but failed [3]. That they try again with Facebook, indicates a belief of Facebook being an advantage or maybe even essential for a social feature to work.
Except from improving usage quality social features of applications improves the strength of existing services. In class we have seen how a service of superior quality could fail to spread, if the quality for the users depended on what their friends used. Social features introduces these dependencies, reducing the thread from new entrants to exiting players like Netflix and Spotify. From an economical point of view, this increases the profitability of these services [5].
An interesting twist to this is a Facebook initiative from January. Their cooperation with Spotify now offers social listening, so you can listen to the same tracks as your friends. But face book doesn’t limit this service to Spotify. Facebook states, “The music will play through the service your friend is using” [4], which indicates that other services than Spotify can use this feature.
By doing this Facebook decreases the switching cost for its users, if they want to change to a Spotify alternative, which weakens Spotify’s strength. On the other hand, if a Spotify competitor wants to exploit this, they must cooperate with Facebook increasing Facebook’s strength and bargain power towards services. Facebook thereby conquers strength and profitability from these services.
If we free brain a lit on this we might see a future Facebook so powerful that service providers will have to pay in order to get their social features incorporated into Facebook. A natural consequence of this will be a competitive pricing on exposures, which at the moment have the form of Facebook update. “Ad auctions determining your news stream” may sound creepy, but it might not be far away.

-T. Bertelsen.

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