Just as The Economist predicted, social networks are starting to open up their services to outsiders, to provide something like a “social operating system” for the wider web. Competition between social networks is driving this. The leader this time was MySpace, which announced a data availability initiative (couldn’t they come up with a more sexy name?) that allows third-party sites to interact with MySpace data in some ways. Following close behind was Facebook, which has announced a similar initiative.

The interesting thing about these initiatives is that they are likely to reduce traffic to the main Facebook/MySpace sites, as people will be able to perform some social networking tasks on third-party sites. The big question is what this means for the social networking business model. If this trend continues, it starts to make the ad-supported model look shaky, unless the social networks can somehow push ads out to third-party sites as well. However, there may be other revenue opportunities, such as identify verification.