Par Pierre Bellanger, président et fondateur de Skyrock
The first online social networking services initially aimed to help people make contact with others who shared a need or situation.
In their original form as support groups, those suffering from the same illness could exchange views on the forums which were the forerunners to these services. From 1995 one of the first networks, the American Classmates, enabled users to get in touch with school friends. BlackPlanet, founded in 1999, was aimed at the African-American community. Friendster, launched in 2002, encouraged people to contact friends of friends. In 2003 MySpace seduced the younger generation in America with the freedom provided by its profiles, pseudonyms and musical orientation. Finally, Facebook, founded in 2004, was originally reserved for a few universities and then only the academic world. It therefore formed a network of students under their real identities. In the beginning an en.edu email address was required to sign up.
In Asia, Korea's CyWorld was launched in 1999 and brought together the younger generation who participated under the cover of avatars. Japan's Mixi, founded in 2000, required invitations, thus encouraging the creation of a homogeneous network. China's Renren, created in 2005, focused on the student community (with more than 160 million members nonetheless) which participated using pseudonyms.
In Europe Skyrock launched its social network of blogs in 2002 and, like the radio station, encourages freedom of expression among the new generation. It is the leading site of its kind in France and Europe. Skyrock uses pseudonyms, as does Hyves in the Netherlands which was founded in 2004. Spain's Tuenti was launched in 2006 and requires invitations.
Even before the Internet and the Web, the first virtual communities came together through a network of computers: from 1979 on The Source and subsequently, from 1985, on WELL before widening to include Prodigy, Compuserve and America Online. However, the low level of usage, their low profile, the cost and the difficulty of accessing them meant that these first networks were highly specialised and limited to a minority. Before their time, they were responding to the first promise of online social networks: providing a sense of belonging to a specific group or community.
Facebook would make the radical decision to abandon that sense of belonging by successively expanding its membership until it became what it is today: the leading universal social network using real identities with more than half a billion members.
The result is incredible: a mutant hybrid somewhere between micro-socialisation and planetary globalisation.
As Facebook was initially designed for the academic world where in the same place (the campus) and between identifiable individuals (the students) work, relationships and pastimes were brought together without a past history, it obliged all users to use a single identity in a mono-contextual and one-dimensional relational network: family, professional relationships, friends from various periods in their lives and leisure activities appeared on the same page without distinction.
However, the experimentation and evolving identities of young people did not fit this structure; the complexity of adult relationships and the heterogeneity of their social world (itself multifaceted) were not taken into account.
The result was a transformation of the meaning of the word “friend”, compressing subtle relational situations which normally cannot be separated from their individual circumstances and histories into a single, all-purpose term.
How did such a restrictive and untenable transposition seduce so many?
For one thing, when you first use Facebook it is unbelievable. In just a few moments all your acquaintances appear and you can get in touch with any one of them. As soon as you are accepted as a friend by one or the other, you enter into a relationship in a way you have never imagined. It is a revelation.
Moreover, the service the site provides is extraordinary and innovative: the lives of your circle of friends are now perpetually updated and they all see themselves as being at its centre, playing the game, publishing their news and displaying the details of their lives, quickly gratified by the reactions of the others.
The traffic on the site and the time users spend there also give the service a quantitative reactivity at any given moment which few, or no, other sites can rival.
But the problems start to appear when using the site. The circle of friends constantly expands until it becomes a crowd. Everything is mixed together in a muddle and users cannot remove themselves. The binary simplification of the connection (friend or not) leads users to accept waves of contacts into their digital family. These contacts must be kept happy and cannot be kept waiting indefinitely. The infinite, changing gradient of the fragile fabric of our relationships is therefore put through the Boolean mill until it becomes an obese, distant address book.
Subsequent experiences with the service reveal that the initial circle of friends is in fact a public place; users always realise that too late.
The more an exchange is real, the more it is restricted. What do I have to say to more than five friends other than that everything is fine? And what about three thousand? What is expressed via the service therefore slides towards the reassuring banality of our conventional selves.
The site is aware of this situation and has a range of fifty or so confidentiality parameters users can manage themselves. They are directed to make their decisions from among more than 150 options.
It is also possible to set parameters for each publication where recipients can be chosen individually.
A lot of time and patience is required to navigate your way through this arsenal which, deliberately or not, is confusing and dissuasive.
It should be added that the collateral damage of a wrong step can be dramatic. “Friends” distanced by setting parameters for a piece of information can realise that they have been pushed aside – with understandable consequences.
Such complexity means that three quarters of users do not change or no longer change their default parameters which themselves evolve and are automatically modified by the service every six weeks or so.
Finally, Facebook owns the personal information it is provided with and remains its guardian for its benefit under the ultimate authority of the jurisdiction of Sacramento in California. This is therefore the greatest export of intimate information of all time, voluntarily carried out by millions of users across the world with staggering naivety.
That is why, to return to the very nature of social networks, many users create a second profile on Facebook using a pseudonym in order to stay in touch with one or several better protected groups. But the machines are watching and, more quickly than you would think, the site proposes friends from your real identity. Sometimes it actually deactivates your new imaginary profile because the service does not encourage virtual identities, particularly when they are denounced by other users.
The behaviour of those who have had their fingers burnt is changing. They are abandoning intimate thoughts and making Facebook their digital identity which can be viewed by all. They use it as a positive vector for their presence on the network, a useful way of making contacts and being contacted. Used in this way, the service demonstrates its extraordinary effectiveness in relaying information to fragile contacts and strangers who share the same interests.
Users therefore take back control and ownership of their private lives on other networks where they use pseudonyms or create restricted groups, reproducing the public sphere / private sphere distinction which is the foundation of individuals in democratic societies.
To counter any disaffection, the service uses ingenious algorithms to highlight the presence of those with whom you are in most frequent contact so that the illusion of intimacy is maintained as long as possible.
The hidden transaction which exchanges convenient contact with friends and family for an unprecedented amount of private information is therefore painless to begin with but becomes increasingly dangerous as time goes by.
Whether you are in the process of negotiating a loan, taking out an insurance policy, competing for a new job or involved in a legal process, be in no doubt that this personal information, so candidly revealed, will probably be used and interpreted against you by unscrupulous people.
So is Facebook getting it wrong? Is it the Friendster of 2012 and beyond? No, probably not because its approach indicates a strategic vision founded not only on growth but also, and above all, on metamorphosis.
In biology metamorphosis is a profound change of form or organisation in a living being during its development. The nature of Internet businesses, founded on the plasticity of programming code and unrestricted access to the network, easily provides them with this possibility to transform themselves.
Facebook in its current form of a hybrid closed/open social network is only a stage, just as the initial student social network was only a phase. To understand this metamorphosis, to understand social networks, one must look to the future.
What are the next stages?
Social networks, be they sector-based, generational or universal, are converging towards four functions.
The first function: the socialisation of searches
A search engine indexes the words of all the web pages it can access and lists the pages where these words appear when a user searches for a particular word. Google's incredible success lay in its ability to discover, and translate into programming language, the relationship between relevance and popularity. The greater the number of links directing the user to the page where the words searched for appear, the more chance there is that the page contains the anticipated response.
By combining this engine with a system of auctioning off key words for the insertion of advertising links, Google has combined extraordinary search effectiveness and advertising return.
Google's effectiveness rests on its indexing ability and the relevance of its results. If a social network like Facebook decides to restrict access to the indexing of its pages while generating a considerable volume of pages and links, it deprives the engine of a significant part of the basis for its work.
Further, if it proves to be the case that the algorithms for listing search results from social networks are more appropriate than popularity via backlinks, a potential alternative to the dominant search engine model emerges.
The social search engine individualises the results of your searches and, for example, lists responses according to the requests and responses chosen by your “friends”. It indexes its pages and those of the Internet while its competitor only indexes the common Internet. If the results of the social search engine are more judicious, it represents real competition in terms of storage and method.
The Microsoft Bing search engine has now joined up with Facebook to socialise its results. It is probable that in the future it will be difficult to do without this social dimension if the best response for each individual is to be provided, rather than for all users generally as is the case with the traditional search engine.
The second function: transactions
A social networking service is a virtual State under the authority and control of its owner who lays down the laws of use, translated into programming code; this guarantees application. The service naturally ends up performing sovereign security and police functions, including the virtual death penalty: banishment from the social network.
Against this State-like background, the service will create its own currency, initially developed generally through games and then extended to partnerships with advertisers. The virtual currency is destined to eventually be converted into real money, making the games an attractive prospect. In the end, the currency can be used for transactions between users and to complement real transactions.
De facto, the service builds up economic power through the collective purchasing power of its members whose access to the service it controls.
States mean taxes. In this case, they take the form of a levy on all transactions related to the service: between traders and members, and between members themselves. The social networking service therefore merges the revenue-generating functions of bank cards, bulk-buying and the State.
Further, each transaction tells the service more about the user's behaviour which makes its access more attractive for adverts and other offers.
If an Internet shopper spends an average of 1,500¤ a year and the site takes 0.5% from each transaction that amounts to 7.5¤ per user. Multiply that by the number of users making purchases...on App Store, the online shop for applications for Apple mobile phones and computers, sales commission on each application is 30%.
The aim of the social network is to bring together as many people as possible using their real identities, to obtain their bank details (prior to creating its own bank directly or under a licence) and to welcome as many virtual shops and services into the network.
The third function: telecommunications
A member of a social network brings in 3¤ a year in revenue from advertising. For Facebook, its 600 million members represent nearly 2 billion euros in annual turnover. A mobile member brings in an average of 30¤ a month, approximately 300¤ a year – one hundred times more. In both cases, the margins are in double figures.
The aim of social networks is to take as much of this margin as possible by placing themselves at the top of the telecommunications value chain. Where is value to be found? In the control of customer relations. Once a client has been acquired, the game is to move service providers and upstream providers from control to interchangeable commodities with pressurised margins.
The two crucial means of control are telephone numbers and invoicing.
The telephone number can be replaced by the profile name of a social networking service. To begin with the profile is connected to a mobile number which becomes underlying and no longer appears directly in the address book. Subsequently, the number can disappear completely. It is enough to click on the photograph of the person to be contacted via the interface of the social networking application installed on a mobile terminal to be put in touch with that person without ever entering the telephone number or even knowing it.
The social networking service, backed by its collective purchasing power, then negotiates with operators for use of the network, accumulating mobile virtual network operation (MVNO) functions on the traditional network and bandwidth purchaser functions on Internet networks (IP networks). As a usage heavyweight, it purchases in bulk to then sell on the telecommunications service at a very advantageous price for its users, all the while retaining the lion's share of the margin.
The social network therefore holds the digital identity and invoicing. The member of the social network has become a mobile client. As for current clients, they obviously benefit from access to the global network.
The telecommunications operator therefore becomes a social networking provider, in competition with all the other operators. The user is a client of the social network. He does not know through which networks and which operators his contributions pass. He no longer has a direct relationship with the network's traditional operator.
The telephone interface of the user becomes the interface of his social network and the latter is turned into a telecommunications social network.
This is not a national approach. The aim is to become an international address book and operate a massive transfer of margins from the telecoms industry to the social network.
And the heart of the battle lies in mobile terminals. There are 7 billion inhabitants, 1 billion phone lines, 1.2 billion PCs, 2 billion Internet users and 5 billion mobile telephone subscribers.
With their presence established through their applications on all intelligent mobile terminals, social networks are taking up their position. It is probable too that terminals with functions dedicated to the use of the main social networks will find a place in the market.
There is no mobile 'phone book or email directory. The best way to contact someone for whom you have neither a telephone number nor an email address is a global social network – and all the more so when it has integrated the functions of telecommunications.
Further, although the traditional telephone system allows people to communicate with anyone with a number known to them, it does not allow them to get in touch with and bring together en masse established contacts and strangers through the creation of a network of immediate ad hoc exchanges which are instantaneous and updated in real time. This function of virtual mobilisation has undoubtedly demonstrated its effectiveness as an accelerator to the Arab Spring.
Better than the telephone, social networks play an irreplaceable role in repairing the broken fabric of human relationships, something we are currently witnessing in Japan after the catastrophic earthquake.
Thus the social network becomes the best means of access which, depending on users' preferences, allows them to leave one or several individuals who might be known to them or not a text, sound or video message, to have immediate or delayed access, etc.
As well as its agreements as a virtual operator, the service will also be able to obtain from operators a commission on all the communications which pass through its mobile application. And the one which refuses will risk depriving its clients of full use of the social network as a communication interface. Good luck.
What response from the telecommunications industry?
Network managers do not necessarily understand the culture of the Internet and think they would be better off concentrating on their basic task by increasing their market share through the merging and acquisition of peers so as to use their size to resist pressure on their margins. The trend is also to differentiate between technical services to increase value, resulting in their differences as to the neutrality of networks. As forecasters, they also think that, in the future, most revenue will come from traffic between machines (which are destined to become preponderant on the mobile Internet), removing from interpersonal traffic its current strategic character.
However, some rare operators do think that interpersonal telecommunications are vital and that being relegated to the service provider role would call into question the very foundations of the industry, even before the increased power of inter-machine traffic. They must therefore invest in social networks.
As attempts at homemade social networks have generally not been convincing, the preference is for acquisitions. That is what SK Telecom did in Korea when it took over CyWorld a few years ago. Similarly, Spain's Telefonica recently purchased Tuenti.
What is certain is that a social networking service is in itself a telecommunications interface. We are witnessing today emancipation from mobile telephone numbers. Thanks to FaceTime from Apple, two users of the iPod Touch or the iPad 2 can talk via a video link without having to exchange 'phone numbers at all - not to mention the global success of Skype...
Prolonging that competition, one of the fields of telecommunications' battle with social networks is certification of identity.
On a social network with real identities there is nothing to prove that I am contacting the person actually presented in his or her profile. Frequently on Facebook, imposters take on the identity of third parties to talk to their friends and siphon off all kinds of useful information for discovering trade secrets, divorce proceedings, a police investigation or just out of unhealthy curiosity. Such usurpation can be extended to all kinds of swindles whereby an individual obtains information about another without their knowledge.
The weakness of identity-based social networks is the falsification of identities.
The State is the ultimate authority on identity, a function which social networks lack. As a temporary stopgap there are credit card numbers and telephone numbers. The convergence of territory and interests between three players (banks, telecoms and social networks) can clearly be seen here.
Telecom and banking mutations do not concern Facebook alone, although it is potentially the major player. Differentiated networks are also stakeholders in this evolution because they will better serve their specific audiences through the integration of banks, mobile telephones and the social network into an appropriate offer.
The fourth function: simulating reality
This function appears to be the most esoteric but it could lead to the greatest revenue: simulating reality. The principle of simulation is the creation of a virtual and dynamic computer model which tries to reproduce and then anticipate reality. Simulation is constantly readjusted compared to actual data and thus it increases its predictive capability. The idea is to use all the data of a social network to anticipate what will occur at D+1, exactly like weather simulations but this time for human society.
The Google search engine was able to follow the progress of the flu epidemic according to the search terms entered by users in all geographical areas.
An international group of scientists is currently working on the Living Earth Simulator which aims to integrate real data from all possible sources in order to follow human activity.
For a social network it means correlating the immense quantity of data it has with the stock markets. Derwent Capital Markets now decides whether to invest according to the messages published on the micro-blogging service Twitter. At the heart of this approach is the work of scientists at the universities of Manchester and Indiana who have managed to predict the highs and lows of the Dow Jones Industrial Average with a success rate of 87.6% thanks to tweets...
This predictive faculty is to be combined with the role now played by machines in stock market transactions. According to experts, they manage more than 70% of the total volume.
Such ultra-rapid management by algorithm needs to be fed with data in real time. To this end, Dow Jones has just launched a stock market information service, Lexicon, used by machines.
Establishment of a pattern in this way through massive injection of data corresponds to the current operating method of machines which is not the same as humans. Instead of establishing reasoning, the machine uses probability-based algorithms which are applied to enormous amounts of data. Clearly, that means that the machine is not looking for logic but emulation: by examining the data, the machine establishes relationships of probability between them. The machine discovers, for example, that if Event A occurs then Event B is three times as likely to occur as Event C. The machine has no understanding of the causality of facts but deduces from this correlation their respective chances of occurring in the future.
These empirical algorithms are then combined with others through a process of genetic assembly and competitive virtual selection to produce the best performing algorithms.
One can therefore understand the immense interest in the amount of data collected by social networks at any given time as soon as they are introduced into transactional machines functioning on these probability-based and evolving algorithms.
The combination of social networks and financial markets is a revolution. It can be applied to the entire economy. Anticipation is key for businesses in terms of allocation of resources, product distribution and strategic direction. The productivity gains to be achieved by these simulation tools are considerable.
Access to this information is becoming a strategic issue, an indispensable lever for competitiveness and, for States, a question of digital sovereignty. Might it be possible for the behaviour simulation data of an entire country to be monopolised in the machines of a competing nation? Is it believable that their public and private economic intelligence players will not obtain access to their own advantage? The impact is immeasurable.
Online social network services are new businesses; most are less than ten years old. They are the services of the future and few can imagine their potential. This is what explains their key role, not only in the future but already today.