Steve Ballmer still doesn’t understand social networking

A few years ago I wrote to Microsoft’s leadership and asked them why they weren’t involved in the new Web 2.0 space. I got an answer back that was about 2,000 words long and included the words “business value” 13 times. Translation: Microsoft’s leadership thought that Web 2.0 and social software like Flickr didn’t have business value and was too much of a potential fad to invest in.

Glad to see that Steve Ballmer, Microsoft’s CEO, is consistent. Notes that Geocities lost most of its value after being acquired by Yahoo and says “it had most of what Facebook has.” Let’s come back to that point in a second.

The thing is that Ballmer has bought into the advertising hype too. I remember when Microsoft’s President, Kevin Johnson, came to our group when I worked at Microsoft and explained that the advertising industry is 10x the size of the software industry and that he was going to steer Microsoft more into an advertising-driven business rather than just one that made its revenues from selling software. Translation: Microsoft was going to compete more with Google, Yahoo, and other companies going after the advertising pie.

Don’t miss this quote. It’s demonstrates everything that is wrong with Microsoft’s approach:

“There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years. That’s for sure,” Ballmer said.

When I worked at Microsoft I heard this over and over and over again from various engineers and program managers who STILL haven’t competed effectively with WordPress, Flickr, Skype, YouTube, or any of the other things over the years I’ve heard this “we can build that in a few weeks” kind of arrogant attitude attached to.

But, remember eBay? Remember how dozens of competitors tried to get into the eBay space? (and still are?)

Why aren’t they succeeding? Because eBay is NOT about the technology. It’s about the community and unless you have something that’ll convince the buyers and sellers all to switch all at one moment you’ll never be able to take eBay’s market away. Translation: it’s too late and eBay has huge defensibility around its business because people won’t move away from it even if you demonstrate 5x better technology.

Same with Facebook. I’m not moving away from it. Why? I have 5,000 reasons why (and another 500 already who want to be included in my Facebook network). Unless you can convince them all to move I’m not moving. This is why LinkedIn isn’t going to disappear anytime soon, even though I like Facebook’s approach a lot better. It’s also why MySpace isn’t going anywhere. My son says his friends are all on MySpace. My brother’s bar is on MySpace. They aren’t moving no matter how hard I evangelize Facebook.

Which gets us back to Ballmer’s quotes.

First, let’s share this one: “I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to younger people,” Mr Ballmer told Times Online yesterday.

I’m 42. Hardly young. And Facebook is appealing a lot to people in my social network and age group lately (and so is Twitter and other social tools like Pownce, LinkedIn, and sites that use social groups like Yelp, Flickr, Upcoming.org). I guess Ballmer missed that. This is what happens when Microsoft executives don’t get outside of their ivory towers very often. Steve, you really need to go to any tech industry conference and hang out in the hallways. Don’t come to San Francisco, you won’t believe anything you hear here anyway. But go to, say, LeWeb3 in Paris and hear what they say about social networks. You’ll probably hear Bebo. Facebook. And a few others. From even the old folks. Last night I was at a National Geographic event and lots of people were talking about Facebook.

Here’s another quote:

Mr Ballmer also noted that sites such as Geocities, an online community that was bought for $3 billion by Yahoo! in 1999, at the height of the dot-com boom, “had most of what Facebook has.”

Oh, boy. No way, no how.

First of all, I never joined Geocities. It never had utility for me. It was a place to build free Web sites. I found it had all the disadvantages to me that MySpace has and NONE of the advantages of Facebook. It was NOT a social network that exerted the kind of social pressure on me to join the way that Facebook did. I tried to ignore Facebook for years. Same with MySpace. But people I kept meeting kept begging me to join. Kevin Rose, when we had dinner, told me I was blowing it by not being on Facebook. That NEVER happened with Geocities.

Also, Facebook is now a business card collection. A rolodex. That has real utility that’ll keep me using it long after it joins the “old fad bin.”

Oh, and anytime people say “this thing is a fad?” I think of blogging. Lots of people told me that when I started it too. It wasn’t. Neither is Facebook.

But all this makes me think that Ballmer is trying to send signals to Zuckerberg (Facebook’s CEO) that the price is too high and that this is just a negotiating ploy. Nice one! But it doesn’t give me confidence that Microsoft is going to figure out Web 2.0 or social networking strategies anytime soon.

It also makes me realize that Ballmer has no clue about the future of advertising. If he did he’d be talking about how Facebook’s ability to concentrate people into buckets in a new way should be copied and studied. That’s where Facebook’s real advertising value is and Microsoft hasn’t demonstrated ANY ability to see that yet. Of course, Facebook itself hasn’t shipped its advertising platform that’ll demonstrate its vision there either, but I hear it’s coming.

Will Microsoft get a clue before Facebook gets an entrenched advertising platform going?

Ballmer proved with Google and with these quotes today: no.

201 thoughts on “Steve Ballmer still doesn’t understand social networking

  1. “2 years later… go see the doctorrrrr”

    From a usage perspective the above is ALL correct.. From a business perspective (and Steve IS a business man) this is crap. We now all know that YouTube is bleeding .5 billon anually and that even Facebook is loosing millions every month.

    The fundament of Web 2.0 is an open, free environment that relies on advertising. Trouble is that the last years have shown that the market value of social networks IS perishable (as everything is), meaning that investors need to invest continuously in creating and marketing new online brands to keep the longtail going. The cost of this investment cannot (to date) be earned back.

    It may seem that big brands such as YouTube and Facebook are the winners with millons egaged users, but in fact they are in the 'autumn' of their life cycle… In the end: the bigger the brand, the bigger the stakes and the bigger the growth expectations. But also, the broader the audience, the lesser the the social context, the lesser the user is known, the lesser advertisers are willing to spend per dialogue,…

  2. “2 years later… go see the doctorrrrr”From a usage perspective the above is ALL correct.. From a business perspective (and Steve IS a business man) this is crap. We now all know that YouTube is bleeding .5 billon anually and that even Facebook is loosing millions every month.The fundament of Web 2.0 is an open, free environment that relies on advertising. Trouble is that the last years have shown that the market value of social networks IS perishable (as everything is), meaning that investors need to invest continuously in creating and marketing new online brands to keep the longtail going. The cost of this investment cannot (to date) be earned back.It may seem that big brands such as YouTube and Facebook are the winners with millons egaged users, but in fact they are in the 'autumn' of their life cycle… In the end: the bigger the brand, the bigger the stakes and the bigger the growth expectations. But also, the broader the audience, the lesser the the social context, the lesser the user is known, the lesser advertisers are willing to spend per dialogue,…

  3. It gets more confusing day by day. I don’t know what a blog is, so I search for answers. Once I figure out the purpose of blogging, will I be blogging because everyone else is doing it? I don’t need to keep up with the Joneses’ to be savvy about technology. If we really want to do social networking, shut off your computer, and go out and visit a nursing home, children’s cancer centers, join a club, visit an old friend, but visit people “in person”, not on the internet. This social networking you are talking about is not even close to being social. It is just black text on a white background, and the new buzz word, I think they are called bloggers, are all coming up with a clever line, but is it coming from the blogger’s heart or his brain with no roots. These are fads, and will fade. Keep in mind, there are more frauds, scams, spams, identity thefts, hacking, porn, you name it, since the internet was introduced. A lot of people have fun with it, a lot of people learn from it, and a lot of children and grownups have been hurt by it. As John Selden, Table-Talk preached, “Rhetoric without logic is like a tree with leaves and blossoms, but no roots.

  4. It gets more confusing day by day. I don’t know what a blog is, so I search for answers. Once I figure out the purpose of blogging, will I be blogging because everyone else is doing it? I don’t need to keep up with the Joneses’ to be savvy about technology. If we really want to do social networking, shut off your computer, and go out and visit a nursing home, children’s cancer centers, join a club, visit an old friend, but visit people “in person”, not on the internet. This social networking you are talking about is not even close to being social. It is just black text on a white background, and the new buzz word, I think they are called bloggers, are all coming up with a clever line, but is it coming from the blogger’s heart or his brain with no roots. These are fads, and will fade. Keep in mind, there are more frauds, scams, spams, identity thefts, hacking, porn, you name it, since the internet was introduced. A lot of people have fun with it, a lot of people learn from it, and a lot of children and grownups have been hurt by it. As John Selden, Table-Talk preached, “Rhetoric without logic is like a tree with leaves and blossoms, but no roots.

  5. “When I worked at Microsoft I heard this over and over and over again from various engineers and program managers who STILL haven’t competed effectively with WordPress, Flickr, Skype, YouTube, or any of the other things over the years I’ve heard this “we can build that in a few weeks” kind of arrogant attitude attached to.”

    Even us engineers understand that sometimes the fact that you can build something doesn’t mean you should.

    Which of those are making money?

  6. “When I worked at Microsoft I heard this over and over and over again from various engineers and program managers who STILL haven’t competed effectively with WordPress, Flickr, Skype, YouTube, or any of the other things over the years I’ve heard this “we can build that in a few weeks” kind of arrogant attitude attached to.”

    Even us engineers understand that sometimes the fact that you can build something doesn’t mean you should.

    Which of those are making money?

  7. My bad, that comment was on another entry…

    Today I was browsing my cousin’s wife’s profile on Facebook and I saw a post by her father on her wall (he’s obviously also “hardly young”). Translated directly from Dutch, this is what he wrote:

    “I am trying out Facebook because ‘Scobleizer” basically says you are an idiot if you aren’t on it”

    Thought you might enjoy!

  8. My bad, that comment was on another entry…

    Today I was browsing my cousin’s wife’s profile on Facebook and I saw a post by her father on her wall (he’s obviously also “hardly young”). Translated directly from Dutch, this is what he wrote:

    “I am trying out Facebook because ‘Scobleizer” basically says you are an idiot if you aren’t on it”

    Thought you might enjoy!

Comments are closed.