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I am consistently more impressed by the innovations emerging from one web company in particular than any other, and no, it’s not Google or Microsoft or Myspace or Wikipedia.

There is another company that seems to innovate much faster, and focus more strongly on being very useful in many interesting ways to many people, that has very rich information on its users, and is growing by leaps and bounds. For a youthful demographic, it is perhaps the most important site they stay on.

I’m talking, of course, about Facebook. With a clean elegant interface, and a degree of usefulness that infuses the whole site, it’s not really a social network site. It’s a social utility.

Signs of its power are growing. Among the younger generations, Myspace’s unruly ugliness has been eclipsed by Facebook’s elegant interface. (Rupert Murdoch, are you listening?)

And the true power of Facebook hasn’t hit the entertainment and business worlds yet, despite the fact it would be very useful to those worlds.

And Facebook isn’t stopping. It continues to evolve into something more powerful. They are now announcing that they are opening their website to outside application developers. For Facebook this may mean they are creating an even richer ecosystem of data and usefulness.

For the users of Facebook, this should let you see when and what applications friends are adopting, which could be very interesting in encouraging you to adopt new features on the site.

For developers, the applications can not only take advantage of the size and this new form of viral growth in the Facebook community, but they will also potentially be able to take advantage of the rich information Facebook has about its customers and their relationships to each other. If before it was difficult to compete with eBay’s stranglehold on buyers and sellers, the Facebook ecosystem may make it easier for an eBay competitor to emerge.

If Google is trying to create one super computer that solves all of your information needs, Facebook is creating one ecosystem that can do the same thing.

If Facebook ever ponders creating a search solution, Google look out.

For more, on Facebook’s past, present and future, see the Fortune magazine article here:
http://money.cnn.com/2007/05/24/technology/facebook.fortune/index.htm?postversion=2007052417

Or find out more about Facebook’s application initiative here:
http://www.techcrunch.com/2007/05/24/facebook-launches-facebook-platform-they-are-the-anti-myspace/

Update, 5/31/07: An excellent analysis of Facebook’s core power can be found here: http://feeds.feedburner.com/~r/Techcrunch/~3/121140079/

Update, 7/7/07: Rupert Murdoch, the power behind Myspace, recognizes Facebook’s ascendancy, as I point out here: http://www.mathoda.com/archives/165

What video game console does the job that consumers want done the best?

Microsoft’s Xbox 360 has high definition graphics, a wide variety of great games, classic controllers, a vibrant online network, and is affordable.

Nintendo’s Wii has crappy graphics, a small amount of games, an innovative motion sensing controller and games intuitively adapted for that controller, a nascent online network, and is cheap (but hard to find).

Sony Playstation 3 has high definition graphics, a small set of games, classic controllers (with motion sensing that is barely utilized by the games), a nascent network, and is super expensive because of its bundled in high definition dvd player hardly anyone yet uses.

For a few months now it has seemed like the battle for supremacy is being fought by the Xbox 360 (getting the hard core gamers) and Wii (getting some hard core gamers and a lot of new to gaming casual users), with the Playstation 3 being a great and expensive flop. However, Sony hasn’t given up the fight.

Sony has announced Home, a free software download that allows your Playstation 3 to access a virtual world. A place to meet friends, hang out, show off. Like Second Life, Sony’s Home allows people to create representations of themselves that wander around fake environments and interact. It’s unclear how much Sony will allow you to customize Home, the way Second Lifers have been customizing that world.

Sony may only be the first out of the gate with a virtual world for its video console, but it’s an impressive step to couple a virtual world to high definition TV’s. Of course, creating a virtual world that is very pretty isn’t the same as creating an environment that people want to use. Myspace is mostly text, but it actually attracts alot of human interest in a way that it will take some time (if ever) for virtual worlds to duplicate.

For more on Sony’s Home, including a video of it, click here: http://www.engadget.com/2007/03/07/playstation-home-revealed/

A number of news and blog sites (NYTimes, Reuters, Engadget, Tai-Pan Way) have noted that Microsoft has agreed to pay a record company, Universal, a certain undisclosed amount ($1.50?) for each Zune device Microsoft sells. They note that this is a major concession by Microsoft, since Apple only pays record companies for each song sold, not for each sale of an iPod device.

The record companies are upset by the deal they originally struck with Apple, since Apple has a tremendously large business with rich profit margins based on iPod device sales, but each iPod has on average only 20 or so songs sold on iTunes. That’s alot of music on iPods that was either legally ripped from CDs, or illegally traded.
Many parties seem to think Universal has done a number on Microsoft by convincing Microsoft to make a payment for each Zune sold. However, to my mind this isn’t so bad for Microsoft either. The true loser in this deal is … Apple.

Microsoft’s Zune has just been introduced, so it doesn’t cost much to Microsoft to make a payment on each hardware device sold to Universal today, and it will take awhile for its sales to ramp up to a point that such payments cost Microsoft much. Microsoft also hasn’t historically put the same emphasis that Apple has on trying to make money from the hardware (PCs, Xboxs, cell phones); Microsoft is content to make money from its software (Windows, Office, Xbox games, Windows mobile).
Apple already has a huge number of iPods it sells every month. And Apple’s contracts with the record companies are going to expire in a year. If Universal insists on the same deal from Apple that they got from Microsoft, in both dollar amounts and in business model structure this is going to cost Apple alot more than it costs Microsoft.

Microsoft is therefore using Apple’s strength (the massive lead in devices sold) against Apple, a neat act of business model judo.  …and since record company contracts often contain a provision that states if you give another record company a better deal you will give me the same deal as well, it’s not just Universal that will get this payment from Microsoft, or demand this type of payment from Apple…  all of the record companies will.
Of course for Microsoft to truly succeed, and for the record companies to obtain some real type of leverage against Apple, the Zune and its successors must still be great products. The early reviews indicate the Zune is a promising device… but time will tell.