Twitter is to Facebook as Google was to Yahoo!
My friend David King, (former Googler, founder and CEO of Lil Green Patch (# 1 social game on FB) and one of the smartest people I know) came up with an analogy I thought was really interesting to explore. His basic premise:
Twitter is to Facebook as Google was to Yahoo!
Similarities:
Google took a core piece of Yahoo! page views (search) and made it a key, stand alone product and brand. I.e. Yahoo! had pageviews from movies, real estate, etc. and so viewed search as an add on. Turns out search was a key product in its own right. Similarly, Facebook pageviews seem to be driven in large part by photos and apps, with status messages a big chunk of page views but not something that has been focused on as a stand alone extensible product. Enter Twitter - with "extensible status" - which has been establishing itself as a standalone product/brand.
Additional key insight David had: The piece of Yahoo's traffic that Google took over, was the most monetizable piece. Similarly, Twitter's extensibility of status messages will be more monetizable then the average Facebook page. Why? Because a subset of Twitter pages show direct intent to purchase something, as well as search on Twitter should be monetizable for a subset of terms.
This ties in to something I have been thinking about the last few weeks, namely...
Twitter will be the winner in social search
I know a number of people who have each launched a social recommendation product in the last few months. They are all really smart people who built nice products. However, I think for quick, real time responses Twitter is emerging as the winner in social search. People send out quick tweets to ask which restaurant to go to, what car their friends like, and what gift to give their significant other.
This real time web of communication tying into a broader use case (of regular, mostly mundane Tweets) is similar to Google vs vertical search engines. People use Google because they can find *anything* on it, so they also enter their commercial queries (which monetize best) into Google as well. People ask their friends for recommendations (which should monetize well) on Twitter because they are constantly broadcasting other stuff (which doesn't monetize so well - such as "I just ate stinky cheese. It made me feel funny".) on Twitter. By establishing a broad use case around real time communication, Twitter has also made itself the potential winner in social recommendations.
Why is Twitter the winner in this and not Facebook?
Facebook still has an opportunity to make a lot of money in this area. However the things that are likely to hold Facebook back are:
The need to focus on the broader experience (i.e. how does status tie into everything else?) This prevents it from emerging as a stand alone app with a simple, clearly defined use case.
Facebook has a ton of stuff on its plate (monetization, mobile, etc. are probably all sucking up resources). Twitter does one thing and does it really well.
Facebook doesn't have real time communication feedback loops built in as tightly as Twitter.
Where the Twitter/Google Facebook/Yahoo analogy breaks down:
Size of outcome (Facebook is adding 5m people a week!)
Google is currently worth>5X Yahoo! by market cap (as of March 02 2009). Facebook is adding 5 million new users a week (i.e. the rough equivalent of a Twitter) and I think will be a very valuable, very large property. I do not think Twitter will be worth 5X more then Facebook in 3-4 years :)
Technology as key differentiator
One of the reasons people say Google went on to be more valuable then Yahoo! is on its focus technology. I.e. better technology led to lower costs (and higher margins) on the serving side and higher revenue on the ads targeting side (e.g. when to trigger good ads, which ads to show that will monetize best, etc.). In the case of FB vs Twitter, FB is known as the stronger technology company.
To sum up with one last commonlaity in Twitter/Facebook vs Google/Yahoo- both Twitter and Facebook will be enormously successful companies (people seem to forget Yahoo is worth >$15 billion and have 100s of millions of users worldwide).