Max Levchin — Google VP of engineering and founder of PayPal and Slide — argues that Facebook will become a serious contender to become one of the more valuable companies in the world if it can “successfully replace core messaging.”
At the Goldman Sachs Technology and Internet Conference in San Francisco, Levchin and Benchmark Capital’s Bill Gurley answered questions about “game-changing technology.” During their fireside chat, the moderator raised the question of Facebook’s unprecedented growth and its impact.
“Facebook has all but successfully monopolized White Pages,” Levchin said, explaining that when you want to find and connect with someone, you go to Facebook. Unlike the White Pages though, Facebook also has information on a person’s interests, likes and social graph.
That alone has turned Facebook into a $50 billion company. However, Levchin says that that becoming the repository for personal information could result “in Facebook successfully replacing core messaging.” If it becomes the web’s primary communication platform, it could become one of the more valuable companies in the world.
Levchin quickly stressed that Facebook’s business shouldn’t be confused with demand generation or demand discovery — a.k.a. search, Google’s specialty. The PayPal co-founder says that he’s read that social graph signals have not been particularly effective in optimizing search-related advertising. Benchmark Capital’s Gurley agreed, arguing that social signals might deliver untargeted ads at inappropriate times.
In fact, Levchin argues that Twitter may be a better advertising platform because following a brand or expert on Twitter is more likely to deliver credible information and advice than your friends, who are likely not experts in biking, finance or other subjects. Gurley, on the other hand, believes there may be a middle ground between search and social by bringing together people with similar interests. For instance, a combination of search and social could help fans of biking in the same city find each other and swap advice and stories.
Levchin and Gurley also discussed the issues facing Microsoft, a lumbering tech giant whose core software businesses are being attacked by the likes of Apple, Google and countless startups. “I think it’s a classic problem of having a massive revenue stream,” Levchin said, explaining that companies with giant revenue streams tend to protect their investments rather than innovate and adopt new and risky business models.
At the end of the firside chat, Gurley made the argument that Google’s Android OS is one the most “disruptive moves in the history of business.” Unlike Microsoft and other software makers, Google gives away its software and sometimes even pays companies to use it. Gurley argues that this is a defensive move by Google to protect its search business. Google makes money off advertising in Android searches and wants to make sure its mobile search business interests are protected. The venture capitalist compared Google’s strategy to protecting a castle by charring all surrounding earth in a 250 mile radius, making it impossible for anybody to come near it.
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