Facebook’s got Google running scared

Google is the elephant in nearly every corner of the Internet, from search and advertising to web-based e-mail, online mapping, and home-brewed video. With its share price setting new highs this fall, its market cap ($188 billion) is now large enough to buy the New York Times, the Washington Post, Gannett, and Time Warner – twice. Or Facebook many, many times over.

The problem is, Facebook’s not for sale. And that’s got Google running scared. It’s an open secret in Silicon Valley that the company has been shopping around a nondisclosure agreement outlining its plan to create its own massive social network – and asking anyone with a pulse to sign it.

Google has to do something fast, because some of its best talent is starting to head for the exits. In July, Gideon Yu, finance chief at Google’s YouTube, left for Facebook. Now other Google guys, stuck in the Googleplex and smelling a Facebook IPO that could turn early employees into early retirees, are also jumping ship.

The latest defector: Benjamin Ling, the top engineer at Google Checkout, its online payment service. A Stanford comp-sci Ph.D., Ling will be overseeing Facebook’s entire software platform. Losing finance types is one thing. But smart engineers are the lifeblood of a great tech company, and Ling was worth a pint, insiders say.

Facebook’s threat to Google, of course, is bigger than a talent war. In fact, the stakes here are about as high as they get in the Internet business. Something is going on that we haven’t seen since Microsoft challenged Netscape and helped define the wide-open web.

Now the social networks are trying to do the opposite – to build what I call the Innernet. It’s the place you occupy with family and friends and where you exercise almost absolute control, showing the world only as much of your true self as you care to while protecting you and yours from the evil that lurks on the wider web, from spam artists to identity thieves. Whoever builds that walled garden stands to make the next great Internet fortune.

Facebook, until recently little more than a student hangout, is the odds-on favorite to win that race. In March founder Mark Zuckerberg opened the site to independent software developers, inviting them to write Facebook applications and reap a share of whatever revenue they generate.

Because creating Facebook applets was so easy, programmers could throw lots of stuff at the wall and quickly see what stuck. Take, for example, Super Wall, a little app that lets users add text, photos, video, or drawings to one another’s Facebook pages. It took a couple of developers part of a June weekend to write. Within three weeks, two million people were using it. Today, more than ten million do.

That’s a real economy (or could be, if someone figured out how to make money from it), and it explains why Facebook has suddenly pulled out of the slipstream of MySpace, growing from 20 million active users in April to more than 45 million today.

More cool apps mean more reasons for people to hang out there – and more reasons for developers to launch new apps. Worst of all for Google founders Larry Page and Sergey Brin: They can’t participate – for privacy reasons Google’s search engine is barred at Facebook’s door like an unwanted encyclopedia salesman.

How does Google plan to fight back? It’s gearing up to do for the web what Facebook did for its network, starting with its social networking site Orkut (which is big in Brazil) and extending it to Gmail, You Tube, iGoogle, and so on.

Imagine Google as the command center for your entire social life; you could chat and read your e-mail there, give your closest friends access to your calendar, and get minute-by-minute updates on their whereabouts. All the big social networks were invited to join the new coalition – even, presumably, Facebook. (No one from Facebook or Google would comment.)

Will it work? Google’s effort, I’m told, is being led by Joe Kraus, the founder of Excite. Though he is as Web 2.0 savvy as they come, I think Google’s plan may be too little too late. Everyone these days is opening up his network – even MySpace.

Besides, there’s no compelling reason for users to leave Facebook now. The developers will stay as long as they can reach a mass audience there. Google’s trying to fix something that isn’t broken – just as Microsoft has been doing for years with search and IBM tried to do with operating systems for PCs. Maybe Google should stick to organizing the world’s information, and let this little mouse roar.

Microsoft reportedly in talks to invest in Facebook

Microsoft Corp is in talks to buy up to 5 percent of Facebook in a deal that could value the fast-growing online social network company at $10 billion or more, the Wall Street Journal reported on Monday.

The move could give maturing Microsoft more access to young users and let Facebook get closer to a major software maker at a time when its growth is increasingly tied to a proliferation of small applications from independent developers on its site.

Citing people familiar with the matter, the Journal said the world’s largest software company sought to buy a stake of up to 5 percent in Facebook for $300 million to $500 million.

Facebook, led by its 23-year-old founder and Chief Executive Mark Zuckerberg, may insist on a valuation as high as $15 billion and is considering raising up to $500 million in cash to expand its operations, according to the Journal.

Such a deal could help Microsoft better compete against Web search leader Google Inc for a growing base of online advertising and put one of the Internet’s hottest names in Microsoft’s camp.

Facebook, which already has an advertising deal with Microsoft, would benefit from closer ties with developers as it seeks to turn its site into a full-fledged Web platform where users can play games, interact and read news about each other, said Forrester analyst Charlene Li.

“If you are building a business around building a platform there is one company that has done it better than anybody else — and that is Microsoft,” she said. “People have been just assuming that Google would be the best partner and that is not necessarily the case.”

Google has also expressed an interest in investing in Facebook, the Journal report said.

“It would probably be pretty good for Microsoft since it has not had the best success in creating really hip, young-people-grabbing stuff on the Web,” said Kim Caughey, a senior analyst at Fort Pitt Capital Group, which oversees more than $1 billion, including Microsoft shares, for clients.

Representatives for Microsoft and Facebook declined to comment.

Zuckerberg has repeatedly said his company wants to remain independent and is seen as preparing to float itself on the stock market eventually.

Facebook has grown to 39 million members, up nearly 63 percent from 24 million in late May, and is quickly gaining ground on larger rival MySpace, which was taken over by News Corp in 2005 for what is now seen as a bargain price of $580 million. MySpace has more than 200 million users.

Facebook’s explosion popularity has also drawn increased scrutiny, including a 50-state investigation into the company by attorneys general concerned about Web sexual predators.

New York Attorney General Andrew Cuomo said on Monday his office had subpoenaed Facebook and accused it of not keeping young users safe. Facebook said it was preparing a statement about the issue.

Redmond, Washington-based Microsoft already has an exclusive agreement until 2011 to broker display advertisements for Facebook. The Journal said Microsoft and Facebook are discussing expanding that agreement beyond the United States.

After relinquishing an early advantage in the lucrative paid search market to Google and Yahoo Inc, Microsoft is trying to catch up by clinching deals to broker display advertising to some of the leading names in “Web 2.0.”

Yahoo and Google are also maneuvering. Earlier this year, for instance, News Corp chief Rupert Murdoch said he had discussed swapping MySpace for a 25 percent stake in Yahoo.

Web 2.0 is a catch-phrase for a new generation of Internet services that run on interactive software and typically rely on content generated by users to attract more visitors. Microsoft also has an agreement with popular news site Digg.com.

Microsoft shares rose 1.5 percent to $29.08 on Nasdaq.

Facebook source code leaked

TechCrunch just received a tip that the source code for the Facebook main index page has been leaked and published on a blog called Facebook Secrets. There are at least two possible ways that the source code got out – the first is that a Facebook developer has sent it out, or the more likely option that a security hole or other method has been used on either one of the Facebook servers or in their source code repository to reveal the code. The blog that published the code only has a single post on it, so it was created exclusively to publish this code – meaning that whoever is behind this both isn’t taking credit for the hole and doesn’t want to be associated with it. While there is no certain way to verify if the code is actually from Facebook, by taking a quick look through the code and by double-checking some paths that have been referenced, we can say with some certainty that this seems to be both real and also a recent version of the main Facebook page.

There are a number of clear ramifications here. The first is that the code can be used by outsiders to better understand how the Facebook application works, for the purposes of finding further security holes or bugs that could be exploited. Since Facebook is a closed source application, without access to the code security holes are usually found through a process of black-box testing, whereby an external party will probe the application in an attempt to work out how the application behaves and to try and find potential race conditions. In closed source applications it is common that developers rely on the closed nature of the application to obfuscate poor design elements and the structure of the application. An attacker getting access to the source code more often than not leads to further security holes being discovered. It is for these reasons that it is often claimed that open source software is more secure than closed source software, since there are many more eyes auditing the code and obfuscation can’t be used as a security measure.

The second implication with this leak is that the source code reveals a lot about the structure of the application, and the practices that Facebook developers follow. From just this single page of source code a lot can be said and extrapolated about the rest of the Facebook application and platform. For instance, the structure doesn’t follow any object oriented development practices, and it seems that the application is one large PHP file with a large number of custom functions living in the same namespace (they also seem to be using the Smarty templating engine).

This leak is not good news for Facebook, as it raises the question of how secure a Facebook users private data really is. If the main source code for a site can be leaked, then it can be said that almost anything is possible. Facebook has become such a success and has such a high profile that it has become a magnet for attacks against its systems. Most large scale applications suffer a breach at some point or another, since the odds are always stacked in favor of attackers, but companies can respond in a number of ways and the hope here is that Facebook will handle this situation gracefully. I don’t doubt that Facebook will pursuit this case with a lot of energy to both find the cause of why the code has leaked as well as to find who was responsible. They will also need to take some very quick short term measures to mitigate the risk to users since you can bet that right this minute there are hundreds of potential attackers pouring through the leaked code and probing their systems. At a quick glance, I know that I can see some obvious things in the code that both reveal certain hidden aspects of the platform and give a potential attacker a good head start.

Brandee Barker from Facebook left a comment on the TechCrunch post:

I wanted to clarify a few things in your story. Some of Facebook’s source code was exposed to a small number of users due to a bug on a single server that was misconfigured and then fixed immediately. It was not a security breach and did not compromise user data in any way. The reprinting of this code violates several laws and we ask that people not distribute it further.

Facebook upgrading

Facebook are upgrading their website, this message was shown today when the site was accessed at 6:46 PM (GMT).

After seeing this message I refreshed the page and the site would not connect (page cannot be displayed). I wonder what they are doing…

Facebook snatches up Parakey

Facebook on Thursday made its first acquisition. The social-networking site bought a Web start-up called Parakey.

Parakey was started by Firefox’s two founders, Blake Ross and Joe Hewitt. The site gives this description of the service: “Computers are frustrating. Creating documents, finding files, sharing information–why do everyday things still seem so tedious and counterintuitive? We hope that Parakey will make your life easier.”

According to Inside Facebook, “Parakey is intended to be a platform for tools that can manipulate just about anything on your hard drive: e-mail, photos, videos, recipes, calendars.”

What is Facebook planning on doing with a start-up that specializes in integrating online services with local machines? Facebook’s press release says the company will be working on the development of its Facebook Platform as well as its Web site.

I would have to say that Parakey will be bringing something fresh to Facebook Platform; otherwise, there would have been no need for this acquisition. Facebook’s developers could have continued to work on it. Tight integration with local content on your computer and offline access to some Facebook services seem likely here.

There are a few things that come to mind when I think about this. The obvious one is, of course, integration between Facebook Events and desktop calendar applications such as iCal and Outlook. A couple of the other things in the list of what Parakey can manipulate (photos and videos) match up with what Facebook is doing right now as well. Although these are good possibilities of what Facebook may do with this acquisition, it’s really anyone’s guess at this point, especially since nobody has yet really seen Parakey in action.

Details of the money exchanged in the acquisition have not yet surfaced. As more information about how Facebook will be using Parakey’s developers and technologies becomes apparent, I’ll do a follow-up on this. This news begs the question of what the odds are that Facebook is going down the road to an IPO.