Changes, changes. What does Facebook really want?

By Somini Sengupta and Ben Sisario, New York Times | Updated: 5 June 2012 01:51 IST

Highlights

Facebook’s moves sharpen the battle lines with Google, the search giant, because Facebook is trying to change the way people find what they want online.

Facebook, the Web's biggest social network, is where you go to see what your friends are up to. Now it wants to be a force that shapes what you watch, hear, read and buy.

The company announced new features here on Thursday that could unleash a torrent of updates about what you and your Facebook friends are doing online: Frank is watching "The Hangover," Jane is listening to Jay-Z, Mark is running a race wearing Nike sneakers, and so forth. That in turn, Facebook and its dozens of partner companies hope, will influence what Frank and Jane and Mark's friends consume.

Facebook, in short, aims not to be a Web site you spend a lot of time on, but something that defines your online -- and increasingly offline -- life.

"We think it's an important next step to help tell the story of your life," said Mark Zuckerberg, Facebook's chief executive, who introduced the new features at the company's annual conference for developers. He called what Facebook was doing an effort to "rethink some industries."

Facebook's moves sharpen the battle lines between the social networking giant and Google, the search giant, because Facebook is trying to change the way people find what they want online. Searching the Web is still the way most people discover content -- whether it is news, information about wedding photographers or Swiss chard recipes. Facebook is trying to change that: in effect, friends will direct other friends to content. Google has its own social network product in Google+, but it is far behind Facebook.

"This is two big rivals getting into each others' backyards," said Sean Corcoran, an analyst with Forrester Research. "It changes the game for what social networks have been doing.

What Facebook is saying is, we are your life online, and also how you discover and share."
Facebook is not becoming a purveyor of media products, like Apple or Amazon.com. Rather, it is teaming up with companies that distribute music, movies, information and games in positioning itself to become the conduit where news and entertainment is found and consumed. Its new partners include Netflix and Hulu for video, Spotify for music, The Washington Post and Yahoo for news, Ticketmaster for concert tickets and a host of food, travel and consumer brands.

For companies that distribute news and entertainment, a partnership with Facebook can draw eyeballs and subscribers, though it still remains unclear exactly how much more revenue a Facebook friend recommendation can generate. Music industry analysts said the new Facebook offerings stand to improve the prospects of new media companies like the music service Spotify, which already has two million users worldwide. But they also pose a challenge to the biggest music seller of all: iTunes from Apple, which has added social features that have gained little traction.

For Facebook, the potential payoff is huge, especially as it seeks to make itself more valuable in advance of a possible public offering. A new feature called Timeline lets users post information about their past, like weddings and big vacations. And everywhere on the site, users will be able to more precisely signal what they are reading, watching, hearing or eating.
This will let Facebook reap even more valuable data than it does now about its users' habits and desires, which in turn can be used to sell more fine-tuned advertising.

How users will react to the new features remains to be seen. The site's evolution could make it easier for them to decide how to spend their time and money. But it could also potentially allow them to shut out alternative viewpoints and information that is not being shared among their set of friends.

And not everyone wants to rely on their friends to shape their cultural discoveries. "Some of my friends have pretty awful taste in music," said Alexander White, whose Colorado-based Next Big Sound tracks social media responses for artists and record labels. "It's one filter. Its not the be-all, end-all."

As of May, Americans spent more time with Facebook than with the next four largest Web brands combined, according to Nielsen. Erik Brynjolfsson, a professor of management at the M.I.T. Sloan School of Management, described Facebook as "sort of a walled garden" that, for better or worse, can increasingly filter every other activity on the Internet.

"As Facebook becomes more and more synonymous with the Internet experience, that is going to benefit Facebook shareholders," Mr. Brynjolfsson said. "Facebook has been very successful in getting the lion's share of people's time and attention. Their challenge in the coming years is to convert that dominance in time and attention into a bigger share of consumer wallets -- a bigger share of money they spend either directly on Facebook or indirectly through advertising."

Other Internet giants have enviable assets of their own. Google has a mountain of data based on how people search. Amazon knows plenty about what you might want to buy, based on what you've bought. But no other technology company has Facebook's treasure trove of social data. It has 800 million users, half of whom return to the site every day, and it also has the information they reveal about themselves, sometimes unwittingly. With it, Facebook has the ability to leverage peer pressure at a grand scale.

Facebook executives describe their efforts as upending the traditional model of marketing. Rather than just helping people buy what they need, they aim to curate what they might want.
Its partnership with Zynga, maker of the popular game FarmVille, illustrates how Facebook can leverage its platform. The alliance has been enormously lucrative for both companies. Whether that model can be replicated with movies, music, or even news remains to be seen.
Still, Facebook has become unavoidable for the entertainment business. Hollywood increasingly realizes the power of peer recommendations to sell movies and television shows; some in the industry call this the "killer gateway."

Studios have long looked at Facebook as an important marketing tool, setting up pages for characters and movies. They have also been experimenting with offering full movies on the site. Warner Brothers, Miramax and Lions Gate Entertainment have all allowed Facebook users to watch movies they have paid for with Facebook's virtual currency, called Credits.
Now the studios are hoping the Facebook platform will let them connect even more directly with customers -- to grab a Facebook user's attention by telling her that her friend has watched a particular television show.

Netflix wants to allow subscribers to watch its video on Facebook. But its plans face a stumbling block in Washington. A law called the Video Privacy Protection Act prohibits the release of information about what movies a person is renting. That law would have to be lifted in the United States.

The changes raise a fundamental challenge for Facebook: can it be all things to everyone? Some of its users want to share with a small group of friends, while others want to be completely open. And there are users who complain about the trivia that sometimes seems to flood the site.

"Facebook wants to be omnipresent in the Web experience by adding commerce, video and mail to their early successes with news feeds and picture tagging," said Jodee Rich, founder of People Browsr, based in San Francisco, which analyzes data from social networks. "Trying to be all things to all people was the undoing of Microsoft and AOL. If Facebook continues to overreach, they will stumble."

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