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Yahoo! Joins OpenSocial Foundation: Move Against Facebook and Google, Not Microsoft


by Caroline Dangson

Research provided by Rachel Happe and Karsten Weide.

On Tuesday, March 25th, Yahoo! announced that it was joining rival Google in its initiative to support a common application programming interface (API) standard that developers can use to embed their social applications into a number of different websites. This initiative is run by the OpenSocial Foundation, a non-profit organization designed to enforce the neutrality and viability of an open, community-governed standard for building social applications across the web. Apart from Google, and now Yahoo!, News Corp.'s MySpace, LinkedIn and Plaxo are also members of the foundation.

Yahoo!'s move is garnering a lot of attention from the media, with several observers theorizing that the company joined the foundation as a way to deflect Microsoft's attempt to acquire it. By embracing a Google-initiated, non-Microsoft, open-source technology, so goes the reasoning, Yahoo! would deter Microsoft from purchasing the company.

This theory doesn't hold water. For Microsoft, the Yahoo! acquisition is of the utmost strategic importance. Any effects of Yahoo! joining OpenSocial that would be detrimental to Microsoft's interests are at least a year away, more likely two. By that time, if the acquisition comes to pass, it would have happened already and Microsoft would simply stop initiatives it deems dangerous.

Yahoo!'s move toward OpenSocial is likely aligned with their interest in opening up their services as was outlined by Jerry Yang and other executives on several occasions. Its move to participate in OpenSocial is part of a larger strategy to both offer more social networking functionality and become more open in order to better able to compete against the likes of Google, Facebook and Microsoft. Just last week Yahoo! announced a search API that allows individual companies to add semantic information to their web search results. Yahoo! is also working to make Yahoo! Mail more open and social as announced by Yang at CES. Furthermore, Yahoo! opened up Yahoo! Mobile to external developers.

Yahoo! hopes that OpenSocial will attract many third party developers to write applications that will then also run on Yahoo!. These applications (gadgets and/or widgets) would enrich Yahoo!'s services by increasing its popularity, its reach into the Internet audience, its traffic, its advertising inventory and eventually its advertising revenue. Yahoo! also bets that its competitors Google and MySpace would not be able to leverage these applications as well for two reasons. One, its services are richer than those of the others and therefore support a broader range of applications. Two, because Yahoo!'s services are richer, users are also more engaged with Yahoo!'s services than with those of the other platforms, and are therefore more likely to adopt them.

Increasing audience reach, inventory and sales was precisely why Google created the OpenSocial alliance in the first place. The move was a reaction to the growing power of Facebook. Last May, Facebook was the first to open its API to thousands of outside developers to build applications for its site, thus greatly increasing the site's popularity and, potentially, its ad sales. This put other players on the spot: They had to do the same or risk being left in the dust. Their problem: Apart from MySpace, no one had the same traction in social networking as Facebook, so no one was likely to attract many developers. In this situation, Google developed a plan to form a standard to allow all platforms to leverage a common API, rather than for each platform to compete against each other and Facebook. In a nutshell, Google and MySpace tried to unify the losers of social networking to gain enough critical mass to also attract developers.

Without Yahoo!, this was a tenuous proposition. With Yahoo!, this is much more likely to happen. So the first part of Yahoo!'s OpenSocial plan will perhaps work: Developers will write applications for OpenSocial. But what's with the second part of its strategy? Even though all OpenSocial applications will theoretically run on Google and MySpace as well as on Yahoo!, will Yahoo! be able to gain more traction from them than the others? IDC's money is on Yahoo!: Google has no successful social networking service, and really only has search and YouTube apart from that. Its other services are too small to move the needle, even if OpenSocial apps will run on them one day. Yahoo! also has no popular socisocial networking service, but they do have a world of products and services that Google can only dream of. MySpace is the dark horse in the race: It is very popular, but it has no real utility, and users have begun to notice. OpenSocial apps might be a way to change that, but it is doubtful they will come in time to avoid user fatigue.

On a larger scale, we now have two camps of 'social' APIs the Facebook API and the OpenSocial API. And that will not change in the near future. A Facebook spokeswoman said her company would not be part of OpenSocial. Facebook cites security concerns and privacy as the reasons to maintain a proprietary platform, but competitive reasons are probably closer to the truth. It is easy to see constellations aligning around each of these players, and we assume it will end in a confrontation between Microsoft/Facebook and Google/Yahoo/MySpace (Microsoft holds a minority stake in Facebook). It is important to note that just because Google and Yahoo! are in the same initiative doesn't mean they will be roasting marshmallows by the fire together any time soon.

Applications written by external developers might even help to tackle one major problem of social networks: Selling advertising on them is difficult because their inventory is deemed to be of a low quality and to be not brand-safe. Applications that attracted consumers interesting for marketers could change that. They would have to provide real utility though: The ability to turn each other into zombies is hardly worth $10 billion.



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