I’ve been using a computer since 1983, and have been active in online communities and sites since the late 1980s. I’ve seen everything from Prodigy and CompuServe to AOL and MySpace come and go as THE popular online destination. But none of these sites could even sniff the popularity that Facebook has right now.
But it’s not going to last.
I was chatting about this with Jill McFarland on Facebook this morning. From my experience, All the online community sites/socnets I have been active on since 1990 have had the same problem: The user base expands to a certain level, and then the site goes overboard in its attempts to monetize that user base, the user experience suffers, and eventually everyone scatters. A lot of people left CompuServe because it was charging $25 a month for 20 hours, then AOL went to an unlimited model (and having the Instant Messaging technology didn’t hurt either). Then internet providers started offering internet access at a rate that was the same or lower as AOL’s price for its online site, and that began to eat away at AOL’s base.
MySpace is/was a free site, monetized via ads. It offered a lot of what AOL had, without charging a monthly fee. But the ads became more intrusive and the entire experience became more spammy, and a lot of us decided to jump sideways off MySpace onto Facebook.
Now, we are just a couple of days away from Facebook’s Initial Public Offering. And just today, it was announced that Facebook’s owners are going to up the amount of their company that they are willing to sell by 25%. There has always been one common problem with all major internet community sites or socnets or whatever you want to call them. Whenever they attempt to monetize, almost all of their monetization efforts come at the expense of the user experience, instead of enhancing it. Come Friday evening, Facebook will suddenly have millions of additional shareholders to answer to. What they want (better return on their investment) will likely be placed above, and probably at the expense of, the user experience.
In that Huffington Post article I linked to above, there was a fascinating comment left by a user that hit me right between the eyes. The user was replying to the idea that Facebook was free and always would be with: “If it’s free then you ain’t the customer, you’re the product.”
Do you think Facebook has a future? Will it still be around in 5 years? Bigger than today? Smaller? What do you see?
I think a lot of it may have to do with how people now view it based on fact they are getting an IPO and founders are getting seriously rich, whilst at the same time, although the platform is still free to use, it can still be flaky, no transparent way to adequately communicate with head office / customer service etc. people may have put up with these when facebook was the new kid on the block but perhaps they wont when the founders have lined their pockets very nicely.
I agree with you in principle: attempts to monetize should not come at the expense of the user experience.
Historically, Facebook has been pretty good about trying things, hearing consumer feedback (backlash?) and killing bad ideas. I wonder how this nimble response time and decisive action will change when shareholders are added to the mix and Mark Z is too rich to care anymore (not saying he will be… Just speculating a possible scenario).
Facebook’s future hinges on the answer to that question… and perhaps a more basic one… Is it possible to make any free social platform valuable to both consumers and advertisers in the first place?
I understand the fundamental dilemma they are facing, and I admire some of the things they’re doing to crack the nut (pass or fail) to both monetize and ensure ads aren’t too intrusive — including but not limited to pushing back on/shutting down advertisers who are chomping at the bit to spam the user base.
More to say on the subject… so I’d like to reserve the balance of my time. 🙂
Cam that’s a good point, Facebook has at least shown some willingness to listen to feedback from their users, and act on it.
But still, I have to wonder what happens when Facebook starts seeing ad revenue fall, and shareholders start demanding action. I fear that action will come in the form of little more than ‘more ads’. We’ll see.
I think you’re right, Mack. Especially because Facebook’s UI is terrible already and the site is flaky. Half the time I can’t get Insights on my Facebook page because of some bug. And one of the dropdowns in the menu plain doesn’t work in Chrome. When you can’t manage to produce a decent UI and reliable system when the focus has been mainly on building your user-base, it doesn’t bode well for how much they will compromise when they are a public company.
The other problem is that they are so focused on advertising. Even the more innovative ad formats are still about grabbing the user’s attention and focus, which directly conflicts with the user’s main goal of connecting with friends and family. I think Facebook will commit slow suicide.
Absolutely agreed. You see the same trend with most popular platforms… they gain a great following, then spammers come in and force us to dodge bullets, then the site changes its user interface and there are growing pains from that… and the monetization starts to take over.
I think every site from Myspace to Pinterest is at some point in that same trend. You see companies like Toms, Whole Foods, and Zappos who are doing a lot of good deeds with their companies as well as keeping the customer really is number one. Why can’t that philosophy translate to the web and social sites?
Wow, that comment smacked me too.
If it’s free, you ain’t the customer, you’re the product. So true!
We’ve gone through generations of technologies where pioneers invest boatloads of time and money to give us something free in the hopes of making money. That raises the question for me… Is there a real balance between the investment to build a community and the ability to make an income that justifies the investment.
I see this same thing with my online community. I put in way more effort than I can justify in financial terms.
Maybe this is the way of social networking sites, or maybe we just haven’t found the right set of entrepreneurs who can find that balance.
Thanks Mack!
It is a bit naive to talk about monetization as a flaw. If a platform doesn’t make money, it will fail. What we see repeatedly online is that luring people with “free” turns sour when someone has to start paying the investors. Is Facebook going “overboard in its attempts to monetize” or simply doing what it must to keep the lights on?
I think this sudden increase in the number of shares to be offered at the IPO speaks volumes about the owners’ willingness to cash out while others still believe in Facebook’s viability.
I am not an active Facebook user but my initial instinct is telling me that the only way it will go away is if there is something to replace it. Do you think we would have stopped using MySpace if Facebook hadn’t become so popular? Was it really the ads? Yes, I have heard that Facebook will inundate users with ads yet we see a story recently that GM is pulling all their Facebook paid advertising, so will the model survive? Time will tell on this one.
I saw someone tweet yesterday that Facebook will eventually figure out how to get us to buy products unintentionally.
Christina I agree, unless there’s another site or 2 that starts stealing users from Facebook, it really won’t go anywhere. But, this IPO also signals to anyone that hadn’t figured it out already that there IS money to be made in social media sites, if they can grow a critical mass of users.
My guess is Facebook will likely be the biggest socnet 3 years from now. But I’m not sure about 5 years, and I do think it will be a bit smaller a couple of years from now.
Anyone remembers Second Life?
It was supposed to be the next big thing at the time… gone by.
Jordi (author of Connecting Forward)
A lot will depend on Zuckerberg. If he keeps a commanding percentage of equity and has the cajones to stand up to the shareholder pressure, then things may be fine. You gotta hope they don’t want to kill the goose that laid the golden egg. However, the past couple decades are full of stories of shareholder greed ruining a company. In fact, it’s arguable that a lot of our economic woes as a country are due to too many companies being public and how way too many people’s finances (401k, etc.) being tied to the stock market.
Everything comes and goes. Facebook may be big now but it won’t last forever. The sooner it goes the better, all it does is inflate peoples egos.