Beware Big ‘Net


Users of the internet are supposed to be used to change, but like any chaotic system it has its bounds.  Recent developments at two large ‘net companies, google and facebook, have done more than feed the usual chatter – and may be significant developments in the evolution of how we connect.

What is clear, however, is that they have demonstrated that complete reliance on one big company is dangerous for users, advertisers, and internet businesses alike.

The first big changes came at facebook, which announced that they were going to start sharing addresses and phone numbers with third parties.  It was something they attempted to do quietly, to developers, without announcing a major policy change to their millions of global users.  It was the sneakiness of it that got attention as far away as Congress and may be starting a major backlash, once again, for the largest social media company.

Why did they do this?  Right now, everything facebook does has to be seen as part of their planned IPO with Goldman-Sachs.  Generating revenue that justifies a valuation up to $60 Billion is going to be difficult, so the whiff of desperation that came with their new policy is probably only a sample of what is to come.

There is nothing new to this, however.  The financial bubble that eventually tripped into housing can be traced easily by the career of one man, Bill Miller, who beat the S&P for 16 years in a row while managing funds at Legg-Mason.  He started out by scoring big with AOL, another huge one-stop shop that offered the ‘net in one convenient package, just like facebook.  Miller went on to promote amazon, and when the ‘net bubble popped he went to Centex (big condo builder) and WaMu (mortgage backed securities).

When you read about facebook you should read this as nothing more than Goldman-Sachs trying to get the same party started all over again and nothing more.  What happens to facebook after Goldman has sold off their IPO is immaterial, meaning they could easily go the way of AOL.  Their cavalier attitude with privacy issues tells me they can and should go away, too.

On the surface, google’s big “farmer update” is related only because it comes at the same time.  As many of us have said for a long time, there is no substitute for quality content on the internet.  Yet there is a huge industry that does little more than SEO, search engine optimization, in an effort to goose google – with highly varying quality.  After years of tolerance google pushed through the first wave of major reform.  Many great articles have been written about the effects, which I’ll summarize.

No one knows exactly how the more than 200 factors claimed by google feed into their search results.  It’s something like the “secret formula” for Cocoa-Cola, but with one major difference – many people make a living by claiming to know the secret.  It’s the interaction which makes it different, as with everything on the ‘net.

What seems to have happened is that the core of the search engine, based on incoming links, has not changed significantly.  There does appear to be a greater reliance on other factors, most likely the data collected from google users as to which sites they selected most when shown a snippet of content and possibly even how many “stars”, or nods of approval, users gave a site.  Another possibility is that google is relying more on “authority”, or the presence of related words to the one being searched for, in order to weed out the most obvious cheaters who just pile on the keywords.

Whatever the exact change was we can be sure of one thing – there will be more.  Some of the sites that saw their results drop are very angry and want Congress to intervene, claiming that google is an unfair monopoly.  But google got where they are by providing useful results and they cannot let that quality suffer for the benefit of the SEO industry.

Once again, there is no substitute for quality.  Incidentally, Barataria’s search engine performance has dramatically increased.

The stories of facebook and google come together when we try to think of a lesson to take away from each of them.  Both cases have one big lesson for businesses and users alike when it comes to the ‘net – reliance on one big company is dangerous at best.

Does this mean things are at a key inflection point, a major change coming through the ‘net itself?  Both of these stories are very much about business as usual, which is to say that for all the chatter nothing has changed at all – we’ve just had a few fundamental lessons made pretty obvious.  The chaos is, as always, well bounded.