What if Facebook isn’t so special after all?

http://gigaom.com/2012/04/24/what-if-facebook-isnt-so-special-after-all/

by ssclafani • 14 years ago

47 43 14 years ago

stevenj2• 14 years ago

If Facebook isn't special, the startup industry will be adversely effected.

(I think Facebook's special. I think it'll be alive and well 20 years from now.)

Edit: as it's often said, venture capital relies on home runs. If the biggest home run of all (Facebook) turns out to be a foul ball, and then an out, I think venture capital will contract; especially consumer tech. (Again, I think Facebook will be fine in the long-run, provided Zuck stays its CEO.)

jasonlotito• 14 years ago

Just for perspective, Yahoo is 17 years old. Infer from that what you will.

cannuk2• 14 years ago

This is a good point and relates to what Stevenj said "As long as Mark Zuckerberg is CEO". I would add to that "and as long as he, and his collective team maintain the vision". Yahoo, over the years suffered from both of these missteps. Apple did to, and then the vision came back. We all know how that turned out.

stevenj2• 14 years ago

What was/is Yahoo!?

Was it a search engine? Was it a portal?

Is it a news site? Is it a media site? Is it a portal? Is it a tech company?

I think Facebook will always be a social network that's focused on building its core product(s) with good technical people.

ryandvm• 14 years ago

I'm not so sure. I recall it being quite common five years ago for small businesses to advertise their web presence as http://myspace.com/FooBar. At the time I was completely disheartened for the future of the web. Of course you never see that anymore, and since then I don't feel that there are many tech companies that don't have to worry about a similarly precipitous fall from grace.

Baba_Chaghaloo• 14 years ago

It might be around in 20 years but I doubt it will ever be any more popular than it is now. It already seems pretty uncool (my grandma's on there but neither I nor any of my friends are) and it's gotten a pretty bad reputation, not many people are going to be too sad to see it replaced.

Shouldn't discourage anyone from doing a web startup though, people are always going to want those sorts of social sharing sites, just maybe not that one.

k-mcgrady5• 14 years ago

20 years ago most people didn't own computers and most people had never even heard the word 'internet'. Predicting Facebook will be alive and well is a crazy prediction. I can't even imagine what computing or the internet will look like in 20 years. Will we even visit websites? Or use apps? Or have info fed directly to our Google Glass(es)?

georgemcbay• 14 years ago

This is completely anecdotal and personally subjective and is only tangentially related to the topic, but today it dawned on me that Facebook now has an eerily 'myspace'-esque cesspool feel for me.

I login less and less frequently and when I do I'm just overwhelmed by the amount of inane spammy "like this post so this poor child can get surgery" bullshit.

I realize I have control over this stuff, but the amount of it is so overwhelming at this point that I can't be bothered to try to keep on top of it anymore. It feels like email pre-good-spam-filtering.

untog• 14 years ago

I've never seen a "like this post" entry in my news feed- perhaps because I only have 180 friends (a list I've never really needed to trim, but have been mindful of).

I log into Facebook less as well, but because it's so ubiquitous that actually going to www.facebook.com and logging in feels like a rarity.

k-mcgrady5• 14 years ago

That sounds like a problem with your friends, not Facebook. I have never seen one of those posts on Facebook. I see them all the time on Twitter as they are retweeted a lot. I have around 150 friends on Facebook, all of whom I now well 'in real life' and 90% of the content I see is interesting and relevant.

awakeasleep2• 14 years ago

You might be oversimplifying, because the same thing could have been said about MySpace.

You said it may be a problem with the friends you chose, which is correct, but when a social net grows too large, real life social pressures start inducing you to include people who aren't interesting, and that has an overall negative effect on the network. So the choice end up being between manually filtering spam and snubbing people who you have to interact with on a daily basis.

ArtB2• 14 years ago

I agree. I think the reason people move onto newer sites is to escape the cesspool... but that cesspool is the one the advertisers want. So if the hipsters all ditch facebook and go to another service they will raise its profile and will attract members of the cesspool to follow to this new hotness...

mmurph211• 14 years ago

I think the problem Facebook has is once someone uses it for a few years there's a potential that they'll get sick of it. When someone gets sick of a site like Facebook they rarely if ever go back. Since it's a social network that results in a lot of lost value and degrades the experience for other users who may have friends leaving the site.

sek5• 14 years ago

The basic problem in my opinion is they don't do anything special to differentiate themselves. Google Maps for example, not a big revenue point but they claimed leadership in web development trough it. Facebook has so many engineers and over they years they don't invest in anything else than their site.

They have a Login system, that's nice but there are a dozen of services out there now. There is even an own protocol for that, OAuth what everybody can use. Did they even try something else? I don't see a real strategy, or vision in their current behavior. The like button was nice to get more data, but that doesn't seem to be the Golden Cow.

The Ad's are not targeted at all, they only use the fact that i am male and single. The ad's are similar to porn sites ("Find hot woman now...."), who can also be really sure that their users are male and probably single.

k-mcgrady5• 14 years ago

"The Ad's are not targeted at all"

Have you ever run an ad on Facebook? The level of detail you can get into when targeting is incredible. Because people have liked places, added their location etc. you can target an ad at people who live in a specific city and like x.

e.g. If I was selling tickets to a Foo Fighters concert in Toronto I could target the ad so only people who live in Toronto AND have liked the Foo Fighters page get shown the ad.

sek5• 14 years ago

This is my personal experience, obviously.

Was your campaign successful? I heard bad things about return rates.

bmm6o• 14 years ago

I've heard that elsewhere, too. But as a Facebook user (not advertiser) I have to agree with OP. I can't remember ever seeing an ad on FB that seamed targeted to me in any meaningful way. I'd be interested to hear if my experience is atypical or I'm just not a typical FB user.

hdctambien2• 14 years ago

If you "like" more things that you are actually interested in, you will start to see more targeted ads.

I never "liked" anything for a while and I was getting those same generic ads (because they didn't have enough data to target me) but once I gave them the data they wanted, I started seeing ads for things that I am actually interested in (comedians I like coming to my city, adventure races in the area, movies that are opening soon). I find the ads on Facebook to be way better than the ads on Google (I actually click and buy things with ads from Facebook).

However, if you go crazy and click the "like" button every time you see it, you will go back to seeing irrelevant ads.

ctdonath2• 14 years ago

Why is _growth_ so paramount? There comes a point where maintaining stability seems more sensible - and having a user base of 13% of the world's population sounds like such a point. Obsession with gathering new users becomes a matter of diminishing returns, but neglecting existing users can become an exponential problem (see MySpace). Keep current membership happy and engaged; long-term growth will follow. I remember some story about a goose and golden eggs...

hexis• 14 years ago

Growth is the concern of investors. They want multiples of their investment, and hence want the company to grow.

bonafidehan2• 14 years ago

Growth is so important because that's the reason something is a good investment vehicle. You invest because you want to increase the amount of money you put in, not keep it the same.

Bottom line, the article is talking about growth in revenue and income. The article outlines that growth can come by two ways: growth in the number of users and the growth in $/user. It claims that the former has little upside because of how large Facebook already is. It raises questions about the latter.

ArtB2• 14 years ago

Growth could be flat and if they paid dividends and stock price stayed flat as well I'd be perfectly happy to buy that stock.

awakeasleep2• 14 years ago

From what I've read, Facebook isn't really interested in cultivating investment. Look at the small float, and Mark Z's firm control of the company with over 50% ownership.

In many ways, for the man on the street Facebook isn't a good investment. At the same time, it doesn't seem to be a goal of management to create a company that entices investors. See the line "we make money to create a better product, not create products to make money."

Doesn't that say it all?

sek5• 14 years ago

If Facebook stagnates, their IPO and future earnings wouldn't generate enough cash to compete with Google. This is the long term view.

damoncali2• 14 years ago

Because the value of the company is tied very strongly to its growth rate.

The present value of a perpetual annuity (to keep things simple) is C/r where C is the recurring payment you get, and r is the discount rate (or risk inherent in actually getting C). Think of r as an interest rate- you demand a higher one if you invest in a risky company.

Throw in growth and it becomes C/(r-g) where g is the growth rate. As you can see, g is very, very important. Valuing a company is much more complex, but the same basic truth holds - growth is a huge contributor to value.

ctdonath2• 14 years ago

To clarify: growth is great, don't get me wrong, but there's a point where you just start running out of market and need to focus on stability & maintenance. When you've got over 10% of the world's population signed up and 5% using the non-essential service daily, focus on efficiency and loyalty; growth becomes the follow instead of the lead.

I'm surprised so little is made of dividends. Growth has faster and sexier return, but will fail sooner than long-term steady well-maintained income. $5/user may not be much, but it's better than $4 and falling. Focus on maintaining long term loyalty; there are a lot of newcomers bent on seducing current users away.

cannuk2• 14 years ago

An interesting corollary to this piece would be to ask how much time and effort is Facebook putting into increasing the Average Revenue per User number? The collective mind of Facebook is smart. They have accomplished quite a bit and it would be foolish to think they didn't start planning for a plateau in growth years ago. It really depends on how they increase that ARPU (like somehow with mobile which they currently make no revenue from). I for one would not bet against them. This talk of Facebook not being cool anymore in my mind signals something different now. They are now in essence a utility (as someone else said ubiquitous) and that is a pretty incredible place to be.

MatthewPhillips• 14 years ago

> (like somehow with mobile which they currently make no revenue from)

That's not true. They are collecting data about you while you are on mobile and using it to feed their ad algorithms for when you are on desktop. Even if you are the super rare person who never uses Facebook from a browser, your data is useful because it influences what your friends see and click on, which influences advertising for them.

brd3• 14 years ago

I think Facebook still has lots of opportunities even if its growth stagnates and its coolness has long since vanished. Considering their size, reach, and engagement its not unreasonable to think that Facebook could dramatically expand its ad offerings or attempt to create a new widely adopted e-currency/e-commerce solution.

Either of these is definitely within their reach, the issue they currently have is that, although they have tons of user data, they have little in the way of user intent and without that they don't have any good ways to monetize their user base. If they can get at the intent, they have a gold mine. Whether they do that by getting involved directly in the transaction or by building a more ubiquitous ad network remains to be seen.

sek5• 14 years ago

It's extremely difficult to create a new revenue stream as a big company. Facebook doesn't have a further scalable business model and i don't see them looking for a new one like Google does. Instagram was a defensive move, exactly the opposite.

brd3• 14 years ago

I agree with everything you've said except "doesn't have a further scalable business model". They've already created an advertising platform, they've already got hooks into websites all over the web, is there any reason they can't expand their ad network to compete directly with Google? I see nothing stopping them. Advertisers love the demographic information facebook has, they just can't leverage it appropriately with the limited advertisement offering facebook provides.

johnrob• 14 years ago

Facebook is an awesome company. Instagram is awesome too. But when someone buys a 13 person company with no revenue for a billion dollars, it means that some variable in some equation got corrupted. Most likely that variable was the 100B valuation of facebook.

mikejsiegel• 14 years ago

What about when someone buys a 65 person company with no (or close to no) revenue for $1.65 Billion? That's what GOOG did with YouTube, and YouTube should have at least $1 Billion in revenue this year. They got it cheap in retrospect.

ojr• 14 years ago

I like how facebook opensource ringmark (http://rng.io) something that is being moved into W3C , mobile will be better because of facebook, I "manage" with facebook because it shows how php can scale even though I am aware of hiphop that takes the php code and turns it into C++

tybris• 14 years ago

What if Facebook is now being used by nearly all Internet users? Should you expect it to keep growing? No. Is it bad for business? Hell no.

What if Facebook isn’t so special after all?

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