The Next Microsoft?

Last week's Facebook summit was an eye-opener. The campus-oriented social networking site flung open its doors to third-party developers, hoping that enterprising minds can make Facebook more than just a place to swap snapshots of last month's sorority social or frat-house kegger.

The early RSVPs to take advantage of Facebook's open-door policy are impressive. Between Amazon.com (Nasdaq: AMZN  ) feeding book reviews into profile pages, Microsoft (Nasdaq: MSFT  ) providing its Popfly app-creating tool, and Prosper's consumer-to-consumer personal loan service allowing coeds to panhandle, Facebook feels a lot more relevant today.

Sure, sites like the more popular News Corp.'s (NYSE: NWS  ) MySpace have given users the ability to customize their profile pages with third-party applications for years. Don't blame MySpace for some of those gaudy templates or blaring slideshows that automatically load on customized pages. However, Facebook's warm embrace of developers during last week's f8 event yields more power to outsiders that can out-Facebook Facebook.

The end result will be a more powerful and flexible social networking site. In other words, after breaking off buyout talks with Yahoo! (Nasdaq: YHOO  ) last year, Facebook is positioning itself to be a more valuable entity on its own.

Have a nice Trips, see you next fall
One of the developer deals announced last week was with travel comparison site SideStep. Trips is the name of the social application that will allow Facebook users to share travel details, along with making new friends along the way.

Let's not dismiss the power of a killer app like this. Whether it's planning that hedonistic spring break trip to Mexico or making summer plans to see some sights on the way back home after school lets out, travel is a major part of the college experience that just wasn't being monetized by Facebook beyond the targeted ads served up by Microsoft's ad platform.

Trips is a perfect fit for Facebook. It's the same way I felt earlier this month when Facebook announced that it would be adding online classifieds on its site. Cash-strapped college kids have used textbooks and dorm furniture that they would love to unload at the end of the semester.

Graduating into the real world
Facebook has evolved from serving just the college crowd with their ".edu" campus email addresses. It began with high school and workplace social networks, but now just about anyone can sign up with a regional account. Conventional thinking pegs social networking as a phenomenon for teens and young adults, yet Facebook CEO Mark Zuckerberg claims that the fastest-growing demographic group on the site is actually the 25-and-older crowd.

It's hard to fault Facebook's flight plan. Starting out as a place for college kids to interact with those enrolled in their own schools blessed the site with a sponsor's dream audience. Marketers drool over the prospects of the young and educated, looking to make brand decisions that may last for decades. It's not the MySpace crowd, which has such trouble contracting "you" and "are" correctly. Sure, they've got hefty student loans to tackle, but they are often good marketing risks.

Evolving into a more open site was going to be tricky on its own, even if the company already serves up more than 40 billion monthly page views. Would it lose its identity in the pursuit of a wider audience? In one sharp move, Facebook now pushes out the viral promotion responsibility to a fleet of incentivized corporate developers.

Obviously, these enablers are looking out for themselves. Warner Music Group (NYSE: WMG  ) wouldn't have come aboard if it didn't believe it could promote more of its artists. Washington Post (NYSE: WPO  ) wouldn't have made the leap if it wouldn't help its circulation. This isn't a charity drive.

Still, Facebook can now aim even higher as it perches itself on the shoulders of dot-com giants. But is it aiming too high? Zuckerberg compares the company's move to Microsoft. It's true that Microsoft won over developers decades ago by encouraging them to write for its operating system. Facebook is doing just that.

However, there's a reason why the Internet is known as the great leveler. Good ideas are copied quickly by competitors. Developers would never want to tie their horses to just one social networking site's hitching post.

Facebook will be more important in a few months. I have no doubt about that. However, what works on Facebook will likely be ported over to rival social networking hubs. The summit was an eye-opener, but Facebook has to make sure that it doesn't blink from here.

Amazon.com and Yahoo! have been Motley Fool Stock Advisor newsletter selections over the years. Microsoft is an Inside Value stock pick. Read all of the original recommendation reports -- now -- with a free 30-day trial subscription to either newsletter.

Longtime Fool contributor Rick Munarriz thinks that Microsoft's Steve Ballmer said it all when he said "developers, developers, developers, developers" a few years ago. He does not own shares in any of the companies in this story. He is also a member of theRule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


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