Techcrunch’s MG Siegler writes an interesting post in which he theorizes that Facebook and Apple’s App Store are both in danger of losing out to open solutions in the future. 

On the Apple issue I’ve already written about that and my thoughts really haven’t changed.  What I’m more interested in are the points he made about Facebook and what they mean for the company.  Here’s the quote…

I happen to think that Facebook may have found the right mixture of open and closed with the Open Graph. It’s open enough that they can continue to extend their reach beyond their already incredible (nearly) 500 million members. And yet it’s closed enough that some semblance of order is maintained and people (at least for now) will keep using it.

Thanks in part to their closed roots where a system of trust was built, Facebook was able to establish and grow the ultimate social graph. Like AOL’s mail and chat systems before it, this is a form of lock-in for users. AOL failed because it was too slow to open up their system and realize that they already had hooks in place to keep users from leaving. Facebook doesn’t appear to be making the same mistake. They already won the social networking wars, so now they can afford to open up and go after the larger web. And Google.

So while everyone fears what the Facebook-ification of the web will mean, I’d argue that the only way Facebook can continue to grow and keep their users is if they continue to open up. At some point, I’d bet that it won’t be in their best interest from a business perspective to do that, and that’s when they may start to decline. But there’s a wild-card. If the company can figure out a Google AdSense-type way to make money while continuing the march towards open, they may be able to hold on.

I agree with his conclusion but what troubles me is the idea that being open somehow represents a negative impact on a company’s business.  The non-computing world is open and there are many companies out there that make more than Facebook  The key to living in an open world is simply filling a role in the ecosystem and being the best at it. 

Facebook’s role is easy to find.  They are the identity provider and the information keeper.  They clearly know this since they’re already taking steps toward that goal (Facebook Connect for example).  But, and this is the important part, they aren’t going far enough. 

Facebook can’t seek to control the user’s information.  They have to openly give everything they have away upon request. 

This is probably the #1 rule of computing: Don’t try to control everything just be at the center of it.  It worked for Microsoft with Windows.  It worked for Google with…well…Google.  And it can work for Facebook in a social world. 

More importantly it can diffuse the backlash against them.  We’re already seeing the beginnings of a bad trend for Facebook with users worrying about how much information Facebook controls and governments starting to question Facebook’s role.  Those issues will only get worse as time goes on.

That’s really bad because Facebook’s future depends on them convincing everyone to trust them in the role of identity keeper.  So the question for them is: What gets them that trust?  The only answer I can see is opening up completely and I think Facebook’s fate depends on how fast they see that conclusion. 

Because the web has already realized it needs a provider of this information and people have already taken steps to fill the void (most notably OAuth).   Facebook needs to step up and take their place in the center of the ecosystem right now.

And Open Graph, in its current form, simply isn’t good enough.

To conclude I’d like to return to the issue of how opening up can make Facebook even more successful.  I agree that an ad network is probably the answer. I’ve already written on why I don’t think Facebook ads currently work but that has everything to do with delivery.  The Facebook page just isn’t the ideal place to put an ad.  

But I think the conceptual underpinnings of their ad system are good.  What they need to do is use their current system to out Adsense Google.  Create a system that works like Adsense but that combines the information on the page with the social info contained in Facebook’s database.  In doing that Facebook can make themselves a more valuable ad service than Adsense and supplant Google as the web’s default ad provider.

That’s the key.  Being open actually gives Facebook the opportunity to grow larger than if they were closed because openness makes people more likely to go to you for the role you fill.  Sure they’ll be opening themselves up to competition from other identity providers.  But it isn’t likely they’ll face a significant challenge anytime soon due to the network effect working in their favor.   Which makes this the perfect time to open up because they have a buffer that will allow them to iron out any bugs. 

So for Facebook there really won’t come a better time for them to step up and lead the web into a more open future.