"Facebook is starting to become the one stop shop for content and interaction, be it through feeds, blog creation, image uploading and just plain ol’ social networking...In May 2007 Facebook launched F8, the Facebook Platform. In a market place that was rich with choice, Facebook offers a platform from which interactive applications can be run exclusively from Facebook itself. Although today it’s far from becoming a dominant platform, in little over 2 months 1000’s of new applications have been offered to Facebook users, with many, many more to come. The richness of the various applications on Facebook is driving user growth; simply people flock to where things are happening. In many ways the growth is similar to the growth rates in the early days of Microsoft Windows."
"Although Web Operating Systems lack wide user uptake to date, the amount of venture capital flooding into Web OS startups is a clear indicator that smart people believe that Web Operating Systems will eventually be a huge hit."
"Imagine that in 2-5 years time Facebook has become the No. 1 destination on the web. Facebook as a Web OS is the leader in online storage, online applications, email, blogging and of course social networking. How people interact with Facebook has changed; Facebook OS has absorbed Facebook F8, all previous Facebook applications work under Facebook OS, but they work more like Windows does today; Facebook has become your desktop and not just an internet site."
"The difference with Facebook will be how the various applications are glued together, and this is where Facebook already has the advantage: Facebook’s origins as a social networking site means that everything they launch is linked in to that central core."
"Yet Facebook is a closed shop; there’s no open source in Facebook and every app built for it will not work with other sites."
Lending Club is only open to Facebook users. In my opinion, Facebook offers only two advantages to Lending Club - community and publicity. These are two significant advantages and they should not be downplayed, but Lending Club is in no way wedded to the Facebook platform. In fact, none of the lending or borrowing actually occurs in Facebook at all-it occurs on a normal web page just like Prosper. Although over 11,000 people have installed the Facebook application, it's almost silly to call it a Facebook application because really it's just a link to the Lending Club homepage. This a screenshot of the Lending Club application in Facebook. If you click on Start Borrowing or Start Lending you are directed to the Lending Club homepage. If you try to start lending or borrowing from the homepage you will be directed to Facebook. Once your account has been authenticated with Facebook there is no longer a need to return to Facebook for any borrowing or lending.
Here's a look at the two advantages that Facebook does provide to Lending Club:
Community. Facebook calls themselves a "social utility." The thousands of people who use Facebook share information in networks and groups. Some are established based on offline networks such as work or school and others are formed among strangers within Facebook. The theory is that loans to friends and groups within these Facebook communities are less likely to default due to established relationships of trust. This is somewhat mitigated by the fact that borrowers and lenders remain anonymous through screen names. Once you have authenticated your account, the only connection to Facebook is the affiliations column. The affiliations column will show two bubbles if the borrower is a member of any Facebook group and three bubbles if the borrower and the lender (you) have a group in common. You can also view the groups that the borrower belongs to. Although borrowers can maintain anonymity through screen names I imagine that through a little detective work someone could use the Facebook group information to identify some borrowers. Within Facebook there are discussion boards similar to the Prosper forums.
Publicty. Facebook is growing rapidly and generating a great deal of buzz. The publicity benefits Lending Club because they are part of the story. For example, it generates articles like NetBanker's list of top Facebook money applications where Lending Club is #1. In addition to the on and offline media buzz surrounding Facebook, there are also features built into the "application" which make it viral within the Facebook community. When you install the application you are asked if you want to promote Lending Club by putting a box in your profile, placing a link in your left-hand navigation, publishing stories in your News Feed and Mini-Feed and placing a link below the picture on any profile. All these help promote Lending Club to the thousands of users inside of Facebook.
Facebook is in no way tied to the Facebook platform. As with many Facebook applications, Facebook provides a community and publicity but does little else. It will be very easy for Lending Club to move off the Facebook platform. In this way, Facebook is not a data black hole and will not become the next Microsoft.
Prosper has built its company primarily through traditional media public relations. The list of press coverage is impressive including this week's story in the Wall Street Journal. Lending Club is running a much more aggressive "web 2.0" advertising campaign by launching in Facebook, writing a blog, and sponsoring a YouTube video contest. Lending Club has plans to move off the Facebook platform in the near future. You can sign up for an email update on their homepage to be notified when they do. Of course, you can also sign up for our email updates as well (top right of page).
Update: Lending Club CEO Renaud Laplanche added a very insightful comment. I've moved it here for those that subscribe via RSS or email: "Good analysis Tom. Lending Club's Facebook-only presence is more a matter of marketing positioning (helps convey the idea that person-to-person lending in general, and Lending Club in particular, will be more successful in an environment where people feel connected to each other, and where we can easily expose these connections) and product development (using Facebook as a public Beta to gain a lot more user feedback and filter traffic before we further open the gates) rather than technical constraints."
