What Facebook’s New Patent Might Mean

Last week, Facebook was granted a patent for its news feed. Although it’s not yet clear how Facebook plans to use this patent, what is clear is that social media is growing up to be a real industry with real business sense.

With this patent, Facebook is in an excellent position to generate revenue off of its competitors’ success. But more importantly, securing intellectual property like this is a sign that the social network plans to be something much more than a place where to kill time at work.

Owning the Stream

The strange thing about Twitter’s success is that Twitter is more of a feature than a stand alone social network. That much is evident in how easily both Facebook and Google Buzz assimilated the Twitter stream format. And with the granting of this patent, Twitter might not even own the rights to itself anymore. As the patent abstract reads:

A method for displaying a news feed in a social network environment is described. The method includes generating news items regarding activities associated with a user of a social network environment and attaching an informational link associated with at least one of the activities, to at least one of the news items, as well as limiting access to the news items to a predetermined set of viewers and assigning an order to the news items.

It’s easy to see how a few social networking sites might be wondering where this leaves them. In fact, the very concept of a news feed seems to be part of what makes a social networking world go round. So now that one company owns the idea, they seem to have that whole world in their hands.

Intellectual Property & Market Share

In business, the real money is in intellectual property — it’s in owning ideas, content, and technology. And given how so many social networks are struggling with their revenue models, it makes perfect sense for these companies to start securing the rights to the basic features that make their their user experience what it is. With that in mind, there are three different things that Facebook could choose to do with this patent.

First, Facebook could decide to do nothing, and just keep this patent up their sleeve as a bargaining chip for some future negotiation with a rival. For instance, should Facebook explore some kind of search/advertising partnership with Google in the future, they could remind Google that Google Buzz is in violation of their patent, and use that to negotiate a more advantageous deal.

Second, they could decide to push out the competition by denying them the use of this feature. This will force many of Facebook’s rivals to close-up shop and users will end up spending more and more of their online time on Facebook than on some (now defunct) alternative.

Finally, and more in line with social media’s spirit of cooptition, Facebook can use this patent to charge their competition licensing fees for their news item feature. Not only would this bolster their ad revenues, but it would let them profit off of the success of their competitors.

This last strategy would also be a more sustainable one because it would give competitors a comfortable sphere of operation, and help prevent them from having to innovate entirely new ways of offering their own online user experience. Besides, users’ attentions are limited, and Facebook is probably nearing their maximum potential mind share as is, and this last approach would allow them to capture additional market share without having to capture additional mind share.

Buying Up More Than You Can Chew

Of course, winning this patent may only be the beginning (and not the end) of the intellectual property battle for Facebook. As Shevonne Polastre, a writer for Penn Olson pointed out, not only was Facebook not the first to come up with a news feed, and:

Due to the difference between Facebook’s newsfeed in 2006 and today, many of these social networking sites can have ways around it. Twitter can say that it’s a microblogging service, which has nothing to do with status updates. LinkedIn can say that it’s only tailored to business. Google can say that it’s a social aggregator, and not really providing updates on specific people.

So while it’s not quite clear what this patent is really going to end up meaning for the social media industry, what is clear is that social media is growing up. This kind of intellectual property strategy is the stuff that big industry is made of. It can be used to raise barriers to entry and put the competition out of business. It can control the competition by making them dependent on you. In the case of Facebook, the latter of the two options makes a lot more sense and seem much more likely.