Because barriers to entry in email are high, Facebook will probably end up disproportionately attracting one demographic—teenagers—to its rumoured new email service
Also as expected, speculation is now wild that Facebook will end up killing Gmail, Hotmail and all the other existing email providers:
There's no doubt that if Facebook start offering email beyond the totally closed service that they already offer (where you actually have to log into Facebook to reply to any messages you've been sent), people who haven't formed a strong attachment to an existing email provider would be tempted to use them. The privacy issues that have repeatedly surfaced around Facebook's unethical use of data will no doubt deter many—including me—from even considering entrusting such a sensitive item as the storage of my personal email to them. But no doubt it will not be a deal-breaker for everyone.
In this respect, the key demographic, of course, is teenagers (1) who have never known a world without Facebook, (2) virtually all of whose real-life friends are also on their Facebook friend lists, and (3) who already use Facebook extensively to communicate with their friends. The barrier to entry for Facebook, in this specific segment, will be a very easy one to break—but not in others, as anyone who's ben though the painful process of changing his email address will know: people with Hotmail, Gmail or even AOL accounts are unlikely to flock to Facebook en masse.
Thus the above chart should give those who use it to write bullishly about Facebook's email prospects food for thought: the two players with the highest market share, until now, have been Yahoo and Hotmail—which has saved neither of those companies from ridicule and, more pointedly, has cost them considerable sums to run: in the year to September 30, 2010, Windows Live, the division including Hotmail, lost Microsoft $17.8bn, up from $14.7bn in 2009. Yahoo doesn't provide a sector breakdown of its income, but it's safe to assume that Yahoo Mail is also a source of losses to it. The mighty Google itself, which is unusual in offering both the best free email service, Gmail, and the best non-free email service, Google Apps, probably posts an overall loss on this segment of its income statement.
No one really seems to be interested in Facebook's actual profitability, the focus being entirely on its admittedly spectacular revenue growth. Profitability has never been Facebook's primary concern:
I don't think social networks can be monetized in the same way that search did... In three years from now we have to figure out what the optimum model is. But that is not our primary focus today.
(Mr Mark Zuckenberg, quoted by Silicon Valley Insider, October 9, 2008)
The trouble, however, is that unlike Google with search and even Microsoft with Windows and Office, Facebook has no clear-cut potential milch cow that it can use to leverage its expansion into other less profitable segments like email. In that respect, its long-term future may resemble Yahoo's more than Google's.
There is no convincing evidence that Facebook will be able to provide the open, server-client oriented service that might give it the technological edge over existing providers, especially its main rival Google
But here we come to the two points that will determine whether or not Facebook's entry into email, if indeed it materialises, is a success:
- firstly, email, as the chart above demonstrates, is a sector in which the cost of switching one's account is very high, because the vast majority of those with email accounts get trapped into using an email address that ties them to one provider (firstname.lastname@example.org; email@example.com, firstname.lastname@example.org); switching to email@example.com, or firstname.lastname@example.org, as Facebook is also rumoured to be planning, will cause the same difficulties for anyone who already uses an email account;
- secondly, email is now essentially a server-client type commodity service in which competitive advantage lies above all in providing a first-rate server experience and opening up the data on the server to clients on any platform on which users wish to access it; this is the main reason why Gmail has become popular, because it offers coherent storage for your email and access to it from their award-winning web interface or from any client or device of your choice, be it iPhone, iPad or Mac (or maybe even other devices, but that need not concern us here).
Google Apps, in fact, offers the best of both worlds, since you can combine using your own domain name with the convenience of cloud storage on what is demonstrably the world's best email server. This is the reason why I've been using it for my own email since 2006, and am happy to pay $50 per annum for the privilege of using the improved Premier service rather than the already excellent free basic one. If I ever change my mind, I'll be free to walk away from Google to another provider without changing my email address ever again.
In order to achieve the tight integration with the rest of its service which has become its hallmark, Facebook is likely to be tempted to offer a customised, closed email environment rather than one built on open, accessible standards
Although of course it's pointless speculating, I think it unlikely that Facebook will initially offer anything as flexible as Google. It is fair to assume they have mastered the technical aspect of setting up servers and handling the massive load that they tend to generate without incurring downtime (remember Gmail started in 2004 as an invitation-only service and this requirement was only dropped in 2007 when the scaling risks were behind it). It is, however, unlikely in the extreme that Facebook will want to offer an open email service. They will want to integrate as tightly as possible with the rest of their users' Facebook accounts:
- it's likely that slug names or vanity URLs, introduced in 2009, will be used as identifiers in order to provide some coherence with the rest of users' Facebook identity;
- in order to achieve tight integration with the rest of their service, Facebook may be tempted to resort to a proprietary protocol, rather in the same way that Microsoft did with Hotmail, making it problematic accessing it using standard SMTP, IMAP and POP;
- I believe it to be extremely unlikely that Facebook will offer users email using their own domain, a service that Google Apps is alone in offering; the very young demographic most susceptible to use Facebook email is unlikely to consider the freedom that using one's own domain gives in any way important and will on the contrary see the Facebook branding as part of the attraction.
For all these reasons, I doubt Facebook will succeed in beating Google in the email game overnight. They will face high barriers to entry and will necessarily offer a more closed experience. Because it is unlikely to ever become a defining component of the Facebook experience, even in the longer term, email may turn out to be no more exciting, for Facebook, that it has been for the long-moribund Yahoo.