MySpace v. Facebook: "It's Not A Decision. It's an IQ Test"

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Venture capitalist Josh Kopelman rips into MySpace today as he applauds Facebook’s new developer platform.

Facebook’s timing is perfect. They just released an API that gives third party developers deep access to Facebook functionality and its 20 million users. Not only can these third party startups get a widget placed on people’s Facebook profiles, but they can also get viral distribution through users’ news feeds and access core Facebook features. Using the tools that Facebook made available, developers could build new versions of some of Facebook’s own applications, like Facebook Photos. Users can then remove those default applications and add the new ones. Like Microsoft with Windows, Facebook is now competing with application developers on its own platform.

This isn’t all just talk, either. The most popular third party application, iLike, has nearly 400,000 users just a couple of days after launching and 10x what they had just last Friday. That means nearly 5% of Facebook’s users have now included it on their profile.

Kopelman’s post looks at the new reality from the perspective of a startup. MySpace is a minefield – startups want access to their users but suffer from the very real possibility of being banned, either temporarily or permanently.

Facebook is viewing things from exactly the opposite position: they are giving startups access to Facebook’s core feature set, and allowing them to show advertising and conduct transactions with users without even asking for a cut. This is exactly why I called Facebook the Anti-MySpace last week. Kopelman goes on to say:

Think about it. If you ran a venture-backed company and had to decide whether you wanted to focus your effort on: (a) a property that welcomed you in and let you keep 100% of the revenue you generate or (b) a company with a vague policy that doesn’t let you generate any revenue, which would you choose? I don’t think it’s even a decision. It’s an IQ test.

Kopelman estimates that $250 million has been invested in widget companies in the last 18 months. When these startups think about where to spend their resources, they’ll be weighing MySpace’s relative size advantage (MySpace has 100 million users, growing by 300,000 or so per day. Facebook has 20 million users, growing by 100,000 per day) to the open and transparent nature of Facebook’s approach. On balance I agree with Kopelman. Startups can build a very large business on the back of Facebook. The MySpace path is much riskier.

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