How Google can prevent Facebook from taking over

Google-CEO Eric Schmidt said at the GSMA summit in Barcelona last month, “Facebook is additive for Google, and Microsoft, which has a good advertising model, remains our main competitor. We have not seen any shift in our advertising due to Facebook.”

To make it stay this way and keep Facebook (FB)  from further strengthening their position and eventually trying new things that could severely endanger Google’s current standing as the leader in generating ad money, this blog entry explores ways for Google to stifle Facebook from becoming a much bigger threat.

Google will not be able to crush Facebook or control them via e.g. a take-over anymore, so they need to tame the beast, meaning, they need to increase their influence and attack the flanks and supply lines so to speak.

Here are some examples to show, what I mean by that,

1)      Technology

Right now, FB runs on mostly Open Source technology. If, let’s say, Oracle would start charging for MySQL databases, Facebook would face immediate skyrocketing costs. Alternatively, if Oracle would cease support or stop development for MySQL to get users to change to the pricier Oracle flagship database, FB would need to switch their database, an even worse scenario as a database migration is no gimme and they’d probably have to choose a professional one, meaning having to pay for licenses. (Not that there is an indication by Oracle to do so currently, I use this just as an example.)

What Google can do here, is “talk” to Oracle, e.g. offer to buy a boatload of Oracle licenses or other products from Oracle or find another way (e.g. joint venture, etc.) to gently propose Mr. Ellison this direction, and I mean “gently”, as you certainly can’t put pressure on him, given his character, that would backfire for sure.

They can, of course, try this with every technology provider of FB, there are easier ones to persuade out there than the volatile Oracle CEO. One little tip of the scale could mean massive, unwanted changes/costs for Facebook, a company, despite more than half a billion users, still not fully established or with a set and proven business model.

2)      Increasing influence/pressure on investors holding a stake in FB

Right now, Facebook is still the hype and Google is still the cash cow, the latter of which is the only thing that counts with professional investors (most often at least..). So another way to sneak in on FB would be to start exerting influence on and via e.g. Digital Sky Technologies, the Russian investment company holding a stake in both ventures . Be it through their sheer size and lobbying power, offering additional shares or other incentives. They can generate further delays and distractions, especially for Facebook’s innovation mastermind Mark Zuckerberg, as he would have to deal with at least some of the new stuff coming from the investors’ corner.

One key is, the more Google can cut out of his personal time budget the less time he has to further develop his company.                                                                                                      This tactic has a time constraint, it only works until Mr. Zuckerberg can provide measurable success (=cash) with Facebook, obviously, as it wouldn’t work with Steve Jobs, for instance, who is in a similar position as mastermind of Apple, because he provides innovation, brand and additionally the figures.

3)      Obtain a controlling or at least vetoing stake in one or more of the key content providers in the Facebook universe

Zynga would be No.1 on that list, as Google already has a stake in it. Zynga generated almost 600 mill USD revenue last year with games based on the Facebook platform. If Google were to acquire them or at least gain a more substantial share, their influence on FB will grow quite significantly. Something, Facebook for sure wouldn’t like. Same with several other companies in the Facebook universe; true, Facebook can survive without Zynga and probably not the other way round, but the more influence Google has on important, established content providers (e.g. also by “adjusting” the respective search rankings) the more they surround Facebook with their troops.

4)      Privacy Initiative

This would hurt Google as well, but FB even more and in a war, you have to sometimes take calculated losses to obtain your goal. Contacting Facebook to (publicly) offer to work out joint privacy rules would fail, of course. But it looks good in the public eye and with politicians to be the initiator. They can then start lobbying the US government to push forward with a privacy initiative, having the good chance to steer it somewhat as the initial driving force, meaning trying to put as many obstacles as possible for FB into a potential privacy bill while simultaneously keeping the handcuffing for their own corporation at a minimum. This is playing with fire as it could backfire in a really bad way for Google itself and is probably only a measure to be considered, when the danger from Facebook has grown strongly to the point, where Google really feels threatened in their core business.

Facebook could consider doing this as well, as the initiator and driving force of a standard for privacy rules would really be in a position to shape the discussion, while simultaneously winning points with the public.