Why Facebook won't build music service from scratch

Facebook is growing up fast and smart. It's a platform company now. It enables, it doesn't create. But that will change.

Rafe Needleman
Rafe Needleman Former Editor at Large
Rafe Needleman reviews mobile apps and products for fun, and picks startups apart when he gets bored. He has evaluated thousands of new companies, most of which have since gone out of business.
3 min read

Facebook is going to launch a music service. That's the oversimplified version of what the tech press expects to see at the company's September 22 developer conference, F8. What we are much more likely to see, as Om Malik reports: A new, Facebook-sponsored way for music distribution companies, in particular Spotify, to worm their way into the Facebook social network.

Facebook is reportedly planning a new music service. A file photo of Facebook founder Mark Zuckerberg. James Martin

Because that's how Facebook rolls now. It's not a destination. Well, for consumers it is. But for everyone else in tech, it's a platform. Facebook started saying that at the first F8 conference in 2007. Since then, the company has solidified this position. Facebook's move to becoming a platform is one of the most canny business shifts in tech. Initially Facebook roped users in and sold ads against their page views. And then Facebook figured out that instead of selling advertising impressions, it could sell the network of users itself to other companies.

That's why Facebook never pushed its own gaming service and why Zynga is big. Because Facebook knows that Zynga knows how to make games. And if it wasn't Zynga in the social game spotlight, it'd be some other company. Meanwhile Facebook makes the network that Zynga can leverage. When Facebook wins, Zynga wins. And when Zynga wins, Facebook collects the rent.

It is a brilliant strategy, and it's playing out in other areas where, if Facebook were not a platform company, it would almost definitely have its own branded services.

For example, Facebook could take on LinkedIn as a jobs network. Why doesn't it? Because it's not a company that builds new specialized services. It's a company that lets other companies take on those tasks. For professional networking, for example, there's BranchOut, a rapidly growing Facebook-based service that does resumes, endorsements, and job search for "Main Street, not Wall Street," according to CEO Rick Marini.

BranchOut is a job-finding network inside Facebook. Screenshot by Rafe Needleman/CNET

Professional networking would seem like a natural fit for the social network service Facebook, and I asked Marini if he's worried about Facebook horning in on his territory, users, and revenue plan. On the contrtry, he said, BranchOut has a "special relationship" with Facebook. Kevin Efrusy, the man who brought the Facebook deal to VC firm Accel, is also on BranchOut's board of directors. Facebook, while it encourages other companies to succeed on its back, also nurtures special partners.

In other areas, like travel and dating, Facebook likewise has encouraged the growth of services that leverage its network of people, but has shied away from building its own applications.

Even in the area of social commerce it's cutting back. It killed its Groupon clone Facebook Deals. Facebook said in a statement, "We think there is a lot of power in a social approach to driving people into local businesses." What's unsaid: Facebook realized it could reap more reward at less risk, by providing and selling the fuel, while other companies competed to build engines.

Growth requires change
The strategy to evolve Facebook from a consumer destination that aggregated users and their time into a platform for other application companies is one of the greatest moves the company has made. It marks Facebook's change from a child to an adolescent company.

Consider the companies that never did metamorphose from their larval stages: Digg, for example, or Friendster. Other social services tried to shift stages at the wrong time, like MySpace. Facebook, so far, seems to have made its big shift at the right time.

I said above that I believe Facebook is an adolescent company. It's not a grownup. That next metamorphosis happens when Facebook realizes it is big enough to start absorbing the companies its existence created, much as Twitter did with its acquisitions of Twitter client and helper companies, but at a much larger scale. When Facebook begins acquiring destination service for their users and cashflows, and not just for tools or engineers, that will mark its real maturity. But that is years away, when Facebook is a public company that needs to show quarterly bottom-line growth that even the energetic teenager that Facebook is today won't be able to maintain.

That's why it makes sense for Facebook to partner to launch a music play, even though it has the muscle to do it alone. In some ways its music service may look like its new tight integration with Skype. It may work closely with more than one music service (bets are on Spotify), but it won't own them. It won't control the experience completely. At least not for a few years.