May, 2012


19
May 12

The Upcoming Internet Identity Holocaust

 (NOTA: este artigo é a adaptação para inglês do que foi publicado aqui na Exame Informática, na minha coluna de opinião Franco Atirador)

I’ve had a discussion with some friends in recent times which is this: what is the reason for the rivalry between Google, Facebook and Twitter? What justifies it? The valuations of Facebook and Twitter make sense?

In fact, apparently, the three companies do not compete directly: Google is good at search,  Facebook and Twitter are horrendous; Facebook is good at group interactions, Google and Twitter are weak; Twitter is good in interactions and information in real time, Google and Facebook are weak.

Note that each of these companies know about their weaknesses. This has led to attempts to overcome them: Facebook investment in advertising (successful) and email (a failure) to compete with Google; Google created Google+ to compete with Facebook and Twitter (we’re still to see if successfully); Twitter is also trying to make money with advertising (though with poor results) and to improve interactions in groups (lists), to compete with Facebook and Google+.

But this is the real war? Is there anything else to justify it?

There is, in my opinion: it is all about the war for identities on the Internet. This could yield billions.

The problem of Internet identity is not new. It has existed since the Internet started to get popular. The question of anonymity. Its importance in shopping and transactions online. Its relevance to issues such as defamation or liability for illegal or criminal acts. Various schemes and systems were tried, always with low adoption. Solving this problem can yield billions. And it’s a game where only one wins. Whoever can get more members becomes, for all purposes, a monopoly.

Until recently, the use of multiple identities was normal. Each of us had (and still has) multiple usernames, one for each service. I always try to catch mvalente but I failed sometimes: an Italian guy got it in GMail first and I had to content myself with mfvalente. In addition to usernames we have passwords for each service (you have a different password for each service, right?). And then there is the problem of having to give usernames and passwords for some services, to allow for the interactions between them.

Some technologies were developed to solve these problems, such as OpenID and OAuth, without much adoption. Not even Microsoft, with Passport, now called Live ID, had any success.

What we have seen in the last 3 or 4 years is that more and more Internet services accept registration as a user using only the Google, Facebook or Twitter ID. Many allow you to use either of them. In my opinion this will not last long and one will get the leadership and a potential monopoly. Facebook, due to the number of current users, is who is best positioned.

Assume, for ease of explanation, that the winner is Facebook. In  3 or 4 years it has won the war and it is used in 99% of Internet services. We use it for email, to access the Flickr; to access Pinterest; to access Last.FM. To access Blogger, Spotify, Steam, Amazon. Everything.

And suddenly Facebook decides to start charging for the identification service. Cheap, one (1) euro per year. Not to users. To Internet services using your Facebook ID to identify you.

Some simple math. Facebook has 900 million users, that would make up for a 900 million euro yearly turnover. But each one of us uses more than one Internet service. Let’s say thats an average of 10 services. That would make up for 9.000 million euro turnover (excluding advertising revenue).

If Facebook decided to charge per user per month, you do the math, just multiply by 12. A monopoly of more than 90 billion euro a year would be a nice business to be in. None of the three players will want to lose this war.