Facebook is not a “social networking” company; Facebook is an identity company. Your data is their castle; your friend network is their moat.
Today, Facebook positions themselves as a mere advertising company. This will change soon.
Within 5 years, Facebook will enter the payments game. Real payments––for real stuff, not just virtual goods. At first, they will compete with PayPal for your web payments. Ultimately, however, they willll compete with Visa for your offline payments.
When the latter hapens, Facebook’s market cap will exceed $500B.
As a result of these moves, Facebook will come under increasing government scrutiny. They are a natural monopoly, after all. Identity is a public utility. Like past utility networks, they will either be regulated, nationalized or broken up.
Unfortunately, the government to do this regulation doesn’t exist yet. The same was true in the 19th century too.
For a time, Facebook will actually be more powerful than many national governments. And Facebook will fight regulation with every ounce of strength they can muster. This is smart. The railroad barons did the same thing. But it won’t last forever. The state, unlike Facebook, has guns.
In the meantime, Facebook will soon earn its place as one of the most valuable companies in the world.
Disclaimer: I write this as an entrepreneur who thinks a lot about the internet and a man who studies history. I have no actual inside information or sources.
*My guess is that Zuck sees the whole payments thing as clear as day––it’s obvious, right?––yet remains blind to the possibility that Facebook could ever become a regulated government utility. To be fair, I don’t think Edison saw it coming either.
would you say the same applies to Google? (Government regulation et. al.)
Matt, I’m on-record saying similar things regarding FB as an identity company and a future direction involving things like payments. But I had never considered FB being regulated as a public utility. With its seemingly unbeatable market share and network effects, it’s not hard to see FB possessing a natural monopoly in the “true and trusted identity” space, which could open it up to regulation. But as long as competitors like G+ are out there with a similarly comprehensive service, the DOJ may be slow to act — even if no one is using the other services. Will be interesting to see how it all plays out.
I think it will matter more and more as the internet penetrates deeper & deeper into our lives.
There is so much untapped potential in advertising, though. Nobody else will have the repository of social data that facebook will have (especially with the changes to the open graph this week) to work with. Payments are definitely an opportunity, but I think advertising is a more natural fit.
Advertising is just lead-gen for commerce.