The Downside

So, I already blogged about Facebook’s Platform and how it will generate new business models and economies on the web. But today brought news of Facebook’s future plans to change the face of the Internet altogether with an online operating system. Facebook, in their first corporate acquisition, bought Parakey, makers of an online OS that is still under wraps.

We’ve been hearing rumors of an “online operating system” for years now, mostly in the context of Google acquisitions, but this is the first time we’ve heard it from a major social network. What exactly is an online operating system, you ask? Well, the definitions vary, but from what is known about Parakey, it looks like they will allow users to do a variety of unique things.

The most important functionality this presents is the ability to directly access files on your hard drive from within a web application. This would let you edit documents, photos, and movies from your hard drive using a web-based application (no more buying and installing software?), and then you can publish your work directly to the web (or your Facebook profile) with a click or two - the software takes care of moving the file from your hard drive to a web server, and it synchronizes the files on your hard drive with your files on the web. It’s possible that the platform would be open as well (it seems like Facebook’s style), allowing other companies to build applications for the online OS, so you could choose which one you wanted to use to write your documents, mix your MP3s, edit your baby videos, etc. etc.

If any upcoming technological development has the capacity to bring user-publishing and user-generated content to the masses, it’s this. Of course its success will depend on the execution and the actual ease of use, but this technology, plugged into a social network that already counts as members a huge number of the people in a demographic that is likely to be interested in publishing their own content, has the potential to revolutionize how we use the web.

For those of us who are already savvy enough to publish our photos and movies to the web, this could offer a different paradigm shift. I blogged a while back about my orgasmic scenario of not having to rely on my home computer and its hard drive, and of keeping all my files online (with automatic backups) so that I could access my MP3s, my movies, and my documents, from any device, at any time. An online OS takes this model one step further - not only can I access my files from anywhere, but I can work with them - I can view them, edit them, and share them - from any device that supports the online OS, be it my computer, a computer in a library, a kiosk at the airport, my Xbox or PS3, or potentially even my phone. Then we would be able to truly unplug. What would be better than that?

How do you manage a business when the very thing that makes money for you hurts your profits at the same time? This is the dilemma that Google has been struggling with several years now, and it’s not likely to go away soon.

Imagine if you will that you are a content publisher, say, an online magazine. Now imagine that you have your “A” articles that your writers spent a lot of time on and that are very in-depth, and that your readers love. Now imagine that you have your “C” articles that aren’t so good, but because they suck, your readers are much more likely to click on the ads on those articles. Believe it or not, if a page has lousy content, users are indeed much more likely to click on an ad. I’ve seen seen sites with lousy content get up to a 12% clickthrough as compared to high-quality content that gets 1-2% CTR.

Now imagine that you get paid per click.

Which articles would you promote at the front of your magazine? A article or C articles? The A’s are great, but they just don’t pay the bills, let alone pay for themselves. The C’s pay well, but get no repeat traffic.This is exactly the paradox that Google faces every day. They can send their users to quality sites with great articles like Creating Passionate Users or uncov, or they can send traffic to sites with questionable content where users are more likely to click on ads because there’s nothing else to do like Associated Content or Squidoo.

Google runs their AdSense ads on virtually every content site on the web these days, so they make money when they send their traffic to the sites that have the best clickthrough rates.

So what is Google to do? They should certainly try to avoid any perception of impropriety. Apparently they’ve started penalizing pages on Squidoo in order to do just that. But going forward, how do they draw the line? How do they look impartial? How do they assure us that the brick wall between editorial (in their case, search) and sales that every good publisher must have is still in place? How do we know that they’re sending us to the best sites and not the ones that make the most money for them?

The answer is, we probably won’t know until someone starts giving better search results than Google.