Venturati

 

Facebook recently displaced Orkut as the top social network in India. This is no mean feat. Social Networking is one of the few spaces where a first-mover advantage can mean a lot. The network efficiencies and advantages built up by the first mover are not only difficult to replicate, there is also rarely any reason for users to migrate from an existing network to another. This point was clearly lost on the hundreds of random social networks that mushroomed in India in the 2005-07 period. Social networking is usually a winner-takes-all market and for Facebook to come in, well after Orkut was well-established, and to wrest the advantage away from it is a huge deal.

Orkut was the first real product that brought social networking to India and very soon, it meant for  social networking what Google meant for search. “Orkutting” caught on as a term. One must note that this rarely happens in the internet industry. With such a large clutter of sites to choose from, a particular site rarely defines its category in a way that Orkut did in India. When a site starts defining a category, it is extremely difficult for another site to, not just overtake it in terms of usage but also start definiig the category. In fact, more people I know spend their time Facebooking that Orkutting these days.

How did this happen? What worked for Facebook? How did it manage to pull something like this off? I’ve often asked people around me why they made the transition. And here’s what I gather from my conversations with other users:  

Bringing Privacy into the market: The Indian male stalker psyche definitely helped people move towards Facebook. The fact that everything about you was so public with no privacy settings whatsoever on Orkut was highly unnerving for a lot of users, especially girls who received random friend requests from unknown wierdos. Facebook’s privacy feature was the first real antidote to that and prompted many to move to Facebook. Sure Orkut did that too soon after but that was the start of Orkut getting into a “Copy-that-Facebook-feature” spiral which didn’t win them a lot of respect with the users.

Everything under one roof: Facebook in its current form, had it not been so successful, could probably have been used as an example of clutter in user experience design workshops. Strangely, the fact that users could do everything from managing their pictures to playing games in one place really helped. Features were rolled out in a phased manner. For users who were already addicted to the site and comfortable with the interface, it probably wasn’t feature overload as much as it was some added utility.

Social RSS: That’s how I would like to refer to the concept of Facebook feeds. While the Orkut design centers around the user and gives him a view of the network with himself at the centre, Facebook gives a more non-centric view of the network featuring feeds from all his friends at various points of time. I have a feeling this could just have clicked for the Indian psyche where everyone loves to know everything happening in everyone else’s life. I won’t have any data to support this but I will have a hard time believing that the average Facebooker in India doesn’t like this feature.

Social Gaming:  Social gaming is the most time-consuming activity on Facebook and many game developers continue to side with Facebook ignoring Orkut. While this may not have been the main drawer in bandwidth-starved India (or so we would believe), it definitely had a major impact in appealing to the next generation of net users, especially the ones who became active netizens towards the middle of this decade.

Many believe that this was waiting to happen given a similar trend in Asia where Facebook displaced Friendster, the #1 social network in most SE Asian countries a couple of years back. The reasons for Facebook’s success in S.E. Asia were much more different though, riding largely on a very well-designed mobile app. S.E. Asia continues to thrive on mobile access to the internet and Facebook’s success here was less about the product and more about the added convenience of mobile access.

Facebook is an interesting and rare example of a late entrant taking the market by storm, redefining the rules (Facebook Connect, Open Like) and eventually dominating the market. Google did it a decade ago in a space which no one was too interested to enter in. Facebook succeeded in doing it in a space that everyone was too keen about and some were already dominating. And like Google back then, Facebook with its virtual currency platform may just lead the way to ,monetizing it as well.

 

LinkedIn, widely known as the #1 professional networking website globally, has a large and rapidly growing base in India and is now establishing a local presence in the country as well. Alexa (a source I would at best consider indicative), ranks it in the top 15 websites in the country in terms of traffic and ~15% of the traffic on the website seems to be from India. What I really like about the company is a very enviable Revenue per employee ratio, something that definitely speaks of scale in the internet industry.

Very logically, it is also pulling down the cost of its subscription packages, which so far, clearly mirrored a US-centered pricing strategy. This should definitely make it a lot more popular among the monetizable segments of its customers viz the recruiters. It will be interesting though to see how LinkedIn makes its way into the country.


Why Orkut or Facebook are not the biggest threat!

This Mint article, in my humble opinion, rather naively suggests Orkut and Facebook (with a professional networking app, of course) as principal competitors to LinkedIn. I disagree on the points made there on more than just a few counts.

1. One third-party app out of a million, focusing on professional networking, will not transform either of these products overnight into a professional social network

2. I have my doubts on the success of a professional networking app on Facebook/Orkut. Utilitarian apps exist on both these networks even now but the majority of the users continue to be obsessed with social gaming (think Xynga) and quizzes

3. Facebook has a better shot at monetization with a Cyworld-like virtual currency model and is already headed in that direction. I don’t see professional networking as being the #1 money spinner for them anytime in the near future.

4. The absolute lack of clutter is something that appeals to me as a serious professional networker, an aspect notably missing in Orkut or Facebook. While that may work for a general purpose social network, I want to keep my navigational challenges at a minimum while networking professionally.

5. Finally, there is that minor point about brand perception. No number of professional networking apps on Facebook is going to make me start perceiving Facebook as the place to network professionally.

The real competition

I don’t see Indian professional social networks (TooStep, PeerPower) as any competition for LinkedIn. I don’t even see them as candidates for alliances. I still can’t understand the need for launching so many carbon-copy social networks when the first mover advantage has clearly been taken by a player.
LinkedIn is a social network all right but rather curiously, it doesn’t monetize the way most other social networks do. Ultimately, competition really kicks through when it comes to the monetization model and the segment whose monetization model is most similar to LinkedIn is the online jobs segment.
I see Naukri and Monster as the real competition for LinkedIn. LinkedIn monetizes through recruiters in much the same way that these job portals do. Yes, the business models are very different; we have active job seekers on one site and at best, passive job seekers and non-seekers on the other; but at the end of the day, both will be competing for the same wallets with the same segment of end users (recruiters and HR professionals). Principally, LinkedIn is a social network with greater engagement than any jobs site and solving for a lot more use cases but purely on its current monetization model of charging recruiters for access to candidates, it is directly competing with Naukri. LinkedIn might do it with a P2P model but any online jobsite with a P2A (Peer to Application) on one side and an A2P on the other side is essentially solving for the same use case.

How could the market change?

This could signify a change in the online jobs market with referral based jobs increasing in number and background checks being engineered on LinkedIn itself. However, the basic market dynamic of the middleman will probably not change. The online jobs market (indeed, the entire online classifieds space as a whole) in India is interestingly different from its counterpart in many western countries in the fact that the middlemen (recruitment agency in case of jobs, real estate brokers in case of real estate and, ahem, family / well-meaning relatives in case of matrimonials ) continue to exist even on a platform that is supposed to aggregate the end users. The entry of LinkedIn doesn’t seem to visibly challenge that scenario and all the so-called value creation associated with disintermediation is unlikely to kick in.

The Asian prospect

It will be interesting to see LinkedIn’s progress in other emerging markets, especially South-East Asia, where the rules of social networking and social gaming are being redefined. There are 2 factors in particular that could really work for the company:

1. The mobile angle: Friendster, having failed in most geographies, was the #1 social network in many Asian countries, until Facebook launched its mobile version and took over many of these markets overnight. Indonesia, in particular, is a case study worth exploring. LinkedIn will have to have a relevant mobile strategy (and I don’t just mean a WAP site or an Iphone app) to cater to this market.

2. The online jobs scenario: A sizable number of S.E. Asian professionals, especially those in the information and/or services economy look for jobs across S.E. Asia. Their needs are underserved with there being not even a single online jobs marketplace that consolidates all S.E. Asian markets. JobsDB probably comes closest but is largely used in the principal markets of Philipines and Singapore. LinkedIn could be that one unifying professional networking and job-sourcing website that S.E. Asia currently lacks.

It’s tricky for an American internet company to succeed in these markets. Outside search, portals and general purpose social networking, the only internet company that has succeeded notably in terms of traffic in these geographies is Ebay. However, Ebay grew entirely through acquisitions.

It remains to be seen which of the internet majors entering these geographies can really succeed not just in generating traffic, but more importantly in monetizing them in a manner that justifies all the hoopla around the emerging markets.