Is it me, or are the similarities between Facebook and Microsoft becoming downright eerie? I know Microsoft is a major investor in Facebook, so it's probably not all coincidental. But sometimes it seems like Facebook is running the MS playbook step by step, including the mistakes.

Origins

Gates and Zuckerberg both dropped out of Harvard to start their companies. Superficial and coincidental, sure, but a little weird in the Kennedy-had-a-secretary-named-Lincoln-and-vice-versa way. Additionally, both founders have been depicted in the press as being cold and calculating, with concern for little else besides the success of their company. Gates' image has softened quite a bit since he's retired to pursue philanthropy, but Mark Zuckerberg has a lot in common with the Bill Gates of the 80s and 90s, for better or worse.

Aside from the founders, the companies started off in similar ways. Microsoft's breakthrough product, DOS, was not developed in-house but purchased from another software firm. Zuckerberg is rumored to have "stolen" the Facebook idea from a previous startup he worked with. Whether there's any substance to such claims, it's safe to say the the origins of both companies include some element of controversy. There's a deviation from the archetypal Silicon Valley success story where a group of genius programmers work maniacally to build a better mousetrap. I don't mean to imply in any way that the founding teams of either company aren't very talented or that they don't work very hard, but both have been haunted with a historical footnote that there was an extra circumstance that helped catapult them into greatness.

Facebook and Microsoft have both been highly dependent on network and lock-in effects

Microsoft and Facebook are hardly the only two businesses to exploit these effects, but they are probably the two who met with the most resounding success in doing so. In the early days of Microsoft, being "IBM-compatible" was a major selling point for computers. Part of what this meant was that the computer ran DOS, the operating system IBM licensed from Microsoft. As the number of people with IBM-compatible computers grew, consumers and businesses became increasingly dependent on being able to share data among a common set of programs. The effect continued as Microsoft Office became popular. It was difficult, if not impossible, to send someone a file created in a different office suite and expect them to be able to open it. Eventually, anyone who wanted to have any hope of communicating had to start using Office. Facebook is in a similar position as even the long-time holdouts are starting to cave simply because they need Facebook to get in touch with their friends. Facebook had also until recently taken a walled-garden approach to curating its community. The information on the site was largely closed to non-members. It's illuminating to consider that Microsoft Office has also moved to a more open file format now that the competition is safely crushed. Is Facebook's recent move to grow over its walls and extend its tendrils out onto the open web an assertion of their dominance in the social networking space? On the other hand, many of the walls remain intact. You can't send a message to a friend on Facebook unless you also have a Facebook account. You also can't follow your friends' status updates or receive invitations to events planned on Facebook without an account of your own. Predictions of Facebook's imminent openness may be premature.

Facebook and Microsoft both push their business models to the limits of legality

Microsoft famously leveraged its success in the operating system market in an attempt to seize control of the booming new market for web browsers thus controlling how people interacted with the Internet in the same way they controlled how people interacted with the computer. The result was a landmark antitrust case that cost Microsoft dearly in terms of consumer goodwill. Facebook now finds itself in a similarly powerful position. They are the default repository for personal information. They are also becoming the default way for people to interact with each other via the Internet, much like Windows became the default way the people interacted with a computer. The question on everyone's mind is: What is Facebook going to do with all this power? They have a truly staggering amount of data about consumer preferences all willingly submitted by the consumers themselves. Facebook clearly wants to capitalize on this data-mining bonanza in the most profitable way possible, but they are already drawing the ire of lawmakers in the US and in Europe. Unlike Microsoft, who already had a wildly successful business selling operating systems and office suites before they overplayed their hand with Internet Explorer, Facebook needs to capitalize on every advantage at its disposal in order to satisfy the outsized expectations (and venture capital funding) that have been placed on them.

Privacy : Facebook :: Security : Microsoft

Microsoft's dominance of the software market made them a high profile target for writers of viruses and other malware. The sheer size and homogeneity of the Microsoft ecosystem created the perfect environment for viruses to flourish. Unfortunately, the core of the Windows operation system was not designed to operate securely in the highly networked world that it eventually inhabited. Windows always worked best under the assumption that the user was the sole user of the computer and should have maximum privileges to make any changes. This made it easy for malicious software to install and replicate itself. The neverending torrent of spam sent out by botnets of infected Windows computers is the legacy of this broken security model. Only recently, with Windows Vista and 7 has Microsoft started to make some headway in producing a more secure operating system.

In much the same way, the original Facebook was not built with privacy in mind. Originally, users could only join if they could provide a college email address. With private networks there was not as much of a need to control what information was displayed. As the site has grown, the developers tacked on a bewildering array of privacy controls. The complexity and constant revisions of the privacy policy have left many users unsure of what information they're sharing and with whom. As Facebook approaches 500 million users it presents a target similarly large and uniform as the Windows install base. Aside from the exact same problem of being an attack vector for the spread of malicious software, the Facebook network provides a new set of problems with the spread of more human-readable information. Some users are learning the hard way that you might not want all of your Facebook friends to see everything you post on Facebook. The nature of the site -- you mostly interact with people you know (or used to know) in real life -- causes users to let down their guard more than they might on the open Internet. As a result cons like the Western Union scam make hijacked Facebook account a particularly hot commodity for thieves. In time, users will come to realize that they can't trust Facebook any more than any other communication medium, just like we've all had to train ourselves not to open email attachments from untrusted sources.

What's next?

I don't claim to have a particularly accurate crystal ball, and in truth, I've probably already pushed this analogy as far as it can go. If it were possible to directly compare the trajectories of these two companies, I'd say Facebook today is probably equivalent to early 90s Microsoft. They're just coming into their own as the market leader and they're looking for the best ways to throw their new weight around. Unfortunately, Facebook has a much more fickle and mobile user base than Microsoft ever did. Microsoft's customers avoided competitors due to the need for compatibility. The high cost of a second computer to try out a new operating system, or the technical expertise required to run two operating systems on the same computer, made it impractical for most to experiment with alternatives. Such is not the case with social networks. It's trivial for anybody to maintain two or three different accounts. Users migrate away gradually by starting accounts on new services and gradually spending more time there as more of their friends join. Eventually, they close the old account or just abandon it. (I don't think I ever officially closed my Friendster account, did you?) So far, user outrage has managed to stymie most of Facebook's attempts to profit off of their vast store of data. This hasn't seemed to slow their growth any, though. The majority of the users don't seem to care about the privacy issues, and if they do experience some negative consequences it's likely they'll adjust their use of Facebook rather than abandoning it altogether. In the meantime, Facebook seems to be homing in on an unobtrusive way to realize the immense profits their investors are expecting. Facebook has already passed the point where they can spectacularly flame out. They've got enough momentum that failure is more likely to be a painful, drawn out process. With a vocal contingent of savvy users, Facebook can't afford to ignore the privacy issues like Microsoft ignore security for so long. Facebook will find success by giving users the most control over their own data and demonstrating that the advertising based on that data adds value for the users.

Originally published 2010-05-20 11:14:19