Sunday, December 13, 2009

Google, Facebook Connect and the New Old Generation of Web Apps

Many web brands from Bessemer’s portfolio companies Yelp and LinkedIn, to up and coming companies like Milo and Fixya, have built their brands by acquiring a large percentage of traffic for free thanks to high and broad organic ranking in Google. Now, whereas the first generation of web 2.0 apps relied on Google for user traffic, a new generation of web apps is emerging that leverage Facebook Connect and Twitter’s “sign in with Twitter” to provide a large percentage of the initial user experience. Though this shift is in its early infancy, I believe increasingly we will come to expect our social graph to be embedded in our web apps. Those that resist this shift may risk being left behind.

To understand the implications of this shift, it helps to look at Google. There are two parallels worth making:
  1. Many companies that existed pre-Google did not adjust to a Google world fast enough. The Yellow Pages has become a classic example of this. Web savvy startups like Bessemer's own Yelp and Yodle took advantage of the new Google paradigm and in doing so, have been able to eat Yellow Page's lunch.
  2. In the beginning of most web company’s lifecycle, the company’s ranking in Google’s organic results is a key component of the company’s visitor acquisition strategy. For example, take Milo. For those who don’t know Milo, Milo “searches the shelves of your local stores in real-time to find the best price and availability for the products you want to have - right now.” According to Compete, it is growing like a weed and 71% of its traffic comes from Google (likely people entering a product+location search query). Eventually, if Milo is able to build a product that gets users coming back to the site, it will start to build a brand and get direct type-in traffic; with this, its reliance on Google for free traffic will decrease and a lot of the existential risk of the company will be behind it. In the meantime, Milo is largely reliant on Google and at the mercy of the algorithm gods.
Facebook has also been a platform on which applications rely for traffic. In the first generation of applications, it was the Slide’s and RockYou’s of the world. These companies were built to exist entirely within Facebook’s closed platform and they had even more existential risk than companies that rely on Google; when Facebook completed its redesign, many were all but wiped out. But some, like Zynga and Playfish, survived and thrived. Unlike Slide and RockYou which were largely Facebook profile add-ons, Zynga and Playfish were about games that leveraged the Facebook social graph. In a way, Zynga and Playfish are a hybrid between the first generation of Facebook apps, and what I'll call the second generation. These are the apps that are beginning to crop up outside of Facebook (not unlike Zynga's but leverage Facebook Connect to create a large part of the initial user experience.

Companies like Plancast and TheHotlist are thought provoking examples of this. But now, rather than risk having a majority of their traffic come from a single source (although that may still be the case), they risk having a majority of their user experience come from a single source. Is this as dangerous? It's unclear to me. Companies that effectively leverage Facebook Connect should end up going through the same process that I described Milo as going through. Eventually, I would think TheHotlists of this world will have only a small part of the user experience coming from Facebook's rich data.

This is obviously an exciting shift and I believe parallels the early stages of Google. Companies like the Yellow Pages did not adjust to a Google world fast enough, and were left behind by web savvy startups like Yelp and Yodle. Facebook Connect is going to create a new generation of apps, and by doing so, create a new old generation of apps that didn't jump onto the social graph bandwagon fast enough.