It's Not The Data, It's The Flow

My partner Brad and I were having lunch with Umair a couple months ago and we were talking about how we look for a unique data asset in all of our investments. And Umair scratched his head and said something like, "I don’t think it’s the data that’s so valuable, it’s the flow of the data through the service."

Longtime readers know that I think Umair is one of the great strategic thinkers on the impact of the Internet on technology, the economy, and society and so I’ve been stewing on that comment for months.

That comment came back to me this morning as I was reading all the discussion about "data portability".

Scoble says

Now, why is this little tree so important? Why shouldn’€™t I be able
to copy this little tree over to, say, FriendFeed or Twitter or or Yelp or Flickr or Google’s Friend Connect?

Easy. There’€™s a TON of money in that little tree and the hundreds of
millions of little trees that YOU have added into Facebook and MySpace
and other places.

Steve Gillmor says:

Of course we all know there’€™s something about Google’s implementation
that is screwing with Facebook’s business model. Facebook is telling us
this in case we hadn’t figured out that €œenabling€ users to do what
they want with their data was only allowable with Facebook Connect and
not Google or Microsoft or God help us, Twitter Connect. Imagine what
happens if our Twitter Follow cloud and its Track filtering enable us
to nail up and down connections in real time over XMPP. Oh wait, I can
do that right now.

Marc Canter says:

As some people are astutely pointing out, humans have been moving their data around for years. And whether Facebook likes it or not, its gonna happen.

Erick Schoenfeld says:

But here’s a little secret. All of this data is already leaking out in
ways that Facebook and other social networks can hardly control.
Startups are finding ways around their official APIs to get the data
consumers want into their own systems.

You can digest the entire "data portability" discussion here:

My take on all of this is that the data already is portable if you want it to be. If you are an ad network that can extract value out of my social graph, you are scraping Facebook for that data already. If you are a new web service that wants to make it easy to get my social graph ported over, you are going to come up with some kind of hack to make that happen. With Google and others in the mix, it’s just going to get easier and easier to get social graph data out of social web services. The social graph itself is being commoditized as all things get commoditized by the subversive technology we have created on the Internet.

What you cannot commoditize is the desire to create a social graph on a web service and the desire to maintain a social graph on a web service and the flow of data into and around that social graph.

Facebook provides an incredibly valuable service to my three children. The other day I saw my oldest daughter get an invite to a party on Facebook, she accepted it, and then went to look at her accepted invite page. It was her social calendar, every party she plans to attend in the next two months is there. She noticed she had another event that night and then switched her acceptance to tentative. She uses Facebook the way I use Outlook. Who cares if she can port her social graph out of Facebook? It’s not going to happen anytime soon because the social context and data FLOW through Facebook is providing enormous value to her and her friends.

Twitter does the same thing for me. Sure I can do the same thing on Pownce or even FriendFeed. But I have no desire to use anything else. I am getting a tremendous amount of social and business value out of Twitter. If they stop providing that value to me, then it will be easy to move on.

So the point is this. Social web services need not fear data portability. They need to fear others providing a better experience. Because when others do that, the flow of data moves and they aren’t in the middle anymore. They might still have your data but they won’t have you. And that’s where the value is.

#VC & Technology