Facebook lost the social graph

Various companies have tried to build out identity systems on the web, and none of them were successful until Facebook came along with it's social graph. It did this by offering a service where real world identity was key to it working (as LinkedIn did before) but then crucially, offering that as a platform via FBConnect (which Linkedin did not do, and maybe it could not have given it's more narrow focus).

But on phones, such social graphs already exist and they are called your address book.

With new consumer Internet companies being started every day — and online consumers notoriously fickle — a next big thing will always be rising up to threaten Facebook’s dominance. As a result, Facebook, like other technology companies, is left playing an expensive game of Whac-a-Mole, scrambling to buy its newest competitors and keep those users out of the hands of its rivals.

“This exposes the strategic fallacy behind Facebook, which was the idea that there was going to be a monopoly on the social graph, and that Facebook was going to own it,” said Keith Rabois, a partner at venture capital firm Khosla Ventures. “That’s not true, and I don’t believe Facebook will constantly be able to buy its way out of this structural challenge.”

Whatsapp does not have a social graph, it leverages the social graph in every address book. And it was only successful because of how operators chose to charge for text messaging instead of offering it for free, or as a more reasonably priced option. The inability of telecoms to profit off mobile is remarkable.

update: Albert Wenger agrees and thinks that Facebook overpaid for WhatsApp:

Having had some time to think about that I am now convinced that this deal makes no sense.

Why? Because phone number based messenger apps can bootstrap very rapidly off the graph that is contained in people’s address books. We are witnessing that now with the Telegram Messenger app which apparently signed up nearly 5 million users yesterday. The UIs of all of these apps are virtually identical and are also extremely similar to the basic SMS UI that everyone around the world knows and understands. The combination means there is virtually no enduser lock in at the messaging layer.

I wonder to what degree this was motivated by Mark's own history? His experience has consisted entirely of "make something kids use to connect with each other and become wealthy". Facebook gained traction right away and has not had to deal with any real failure. It's also not how people connect on their phone.