In a negotiation gone sour between Facebook and developer Dalton Caldwell, the tensions between the socia media giant's business and technological sides played out, and this time Mark Zuckerberg's "hacker way" lost. As Caldwell tells it in an open letter to Zuckerberg he posted to his personal blog on Wednesday, he went to Facebook for a meeting in June about getting support for the web service he had developed, App.net, which he says some Facebook developers had called "an interesting/valuable use of Open Graph & Facebook Platfor." But when the meeting got underway, Caldwell says he faced "intimidation-based negotiation tactics" to suggest an "aqcui-hire," which would give him a job but kill his project. They took this position because they felt his creation threatened their own advertising products. "He [Facebook VP] explained that he was recently given ownership of App Center, and that because of new ad units they were building, he was now responsible for over $1B/year in ad revenue. The execs in the room made clear that the success of my product would be an impediment to your ad revenue financial goals," Dalton explains. Rather than integrate his ideas, as Caldwell expected, they just wanted the competition gone. Hacker Way: 0. Suits: 1.
Since Facebook has started trying to make money the Zuckerberg-led Hacker Way has had to deal with its conflicting alter-ego, the side that cares about making the company profitable, which is COO Sheryl Sandberg's job.The business side is generally "subordinate" to Zuckerberg's creative motives, as Fortune's Miguel Miguel Helft and Jessi Hempel noted in their feature on the company last March. That's because Zuckerberg wants to ensure that business doesn't get in the way of the company's goals to make the world more open and connected. Sometimes that causes tension, with one side conceding its goals to the other. Like, the time Facebook covertly bought Instagram for $1 billion dollars without even talking to Sandberg. That was a lot of money for an app. And, unlike other acquisitions, it doesn't sound like Facebook is trying to crush the competition -- not very business savvy, is it. Or, we have Zuckerberg's hesitance to put advertising, something that might help the company's lagging stock price, all over the site. Though, he has relented on that, allowing things like Sponsored Stories to appear in the News Feed, when users complained, the company pulled back its strategy.
This time, however, the Sandberg side of things won out over Zuckerberg. Facebook had previously told App.net that they liked his service, which used Open Graph and was* "similar to what Twitter was like before it turned into a media company," he writes on the Kickstarter-like fundraising page for the future project. It would have helped developers build apps in what he thinks is a more creative because of the less restrictive APIs. It also features a few "technical improvements to existing APIs that we would like to see in the App.net API," he continues. Product developer Hunter Walker had tested the beta product and called it "strong." The app itself fits right in with the hacker way open and connected mantra, as tech blogger Andrew Chen explains. "The idea that attracts me is that App.net could be a completely open backbone for feeds, from which anyone can publish or consume – this is a big transformative thing," he writes. "It turns feeds from something that companies own and manage as closed environments and turns them into an open protocol." The Facebook executives, however, saw this as a threat to their ad-revenue products. So, instead of having a "serious conversation about acquiring my team and product," as Caldwell suggested, the business-men pushed for advertising dominance.
These kind of incidents, which Caldwell says have happened before, reveal Facebook's precarious position. The social network has to balance user experience with making money, without losing too much loyalty on either end. In this case one compromised the other, as app.net would have made app development more open and less reliant on advertising. But, as that didn't fit with some business strategy, the company didn't go for it. Caldwell suggests this is a growing trend at the social network. "I just think you constructed a business that has financial motivations that are not in-line with users & developers," he writes. That's a problem because if Facebook consistently chooses business over users and developers, the company could end up like Google, which has both angered developers and compromised much of what we love about the site for Internet domination. Or, it could go the Yahoo way, which has totally fallen apart by ruining products like Flickr, during its journey to make money. But, unlike these companies, Facebook has a lot less to fall back on -- no big search advertising business, for example -- if it scares everyone away.
*This post originally said App.net was a social graph.