Facebook has been in the news a lot lately since its latest round of mega financing--and some of the attention has included a foreign concept almost never associated with it: failure. There was the CNN post by author Douglas Rushkoff, which suggested Facebook has peaked and everyone involved is cashing out. Then this past weekend came the rumors the site would close on March 15, which went viral (although false).
With our post below, we imagine the "unimaginable," zooming ahead to the year 2016 to offer "a look back" at the phenomon that was Facebook. (Tip of the inspirational hat to Robin Good, whose 2004 "Googlezon and the Newsmasters EPIC" post explored a similar question, also via time travel.)
* * *
2011 was a year of continued growth for Facebook, on the trajectory established in 2009 and 2010. The bumps in the road stemming from ignored privacy concerns, unwanted interface changes and users’ feeling that Facebook wanted to "own" their digital lives continued unabated, but seemed to have little impact on revenue and growth.
During 2012 small investors were rescued from the chance to take a flyer on an overvalued Facebook public stock offering. Irreconcilable differences among the company’s controlling private investors ended in gridlock. Greed saved the day, so to speak, and the IPO was scrapped. Other than that, things continued to be rosy except for one minor blip: U.S. member growth began increasing at slower rates. This resulted in the percentage of overseas members reaching an historic high of 76%.
In 2013 three stealth start-ups, all begun in the 2010-2011 period, launched services they claimed did not compete with Facebook. But all three offered similar social functions coupled with new ones Facebook did not offer. Their new functions were quite different from each other. This prompted industry watchers to split on whether these upstarts represented actual competition or some kind of off-shoot that Facebook could gobble up later. Not surprisingly, best friends of Facebook fell mostly in the latter camp. All three start-ups grabbed attention but not much in the way of numbers in their debut year. In Q4, feeling especially secure and confident, Facebook finally hired its new “professional” CEO and Mark Zuckerberg stepped down to become Chairman and Chief Evangelist.
2014 was a year of unexpected tumult for Facebook. Three Board members resigned when the company failed to move forward with its second IPO attempt. The former directors had wanted the IPO, and objected to the unwieldy and unusual private stock vehicles created for ongoing private financings. In a surprise move, the Romney administration's SEC, now headed by a conservative Democrat who once worked for President Clinton, launched an all-out investigation of Facebook's private financings. The FTC, which had dragged its feet for over a year, also started looking into consumer complaints alleging violation of the Obama "Do-Not-Follow" Act. Two of the three challenger start-ups began posting very credible member numbers, on their way from 10 to 40 million. The third start-up cleanly pulled away from the pack at nearly three times that rate. Finally, the long-predicted merger of Twitter and Google arrived, placing additional pressures on Facebook revenues as increasingly broad, sweeping advertising alternatives emerged with at least a plausible claim to having a cleaner record on privacy and user rights.
The capper of the year, however, was a protracted (and somewhat esoteric) policy fight with the IAB (Interactive Advertising Bureau), in which Facebook was supported by some but not all of its giant corporate advertisers. Surprisingly, the IAB found that Proctor & Gamble, Wal-Mart and Visa International were on its side. Law suits and counter suits were filed. Facebook—which up to then could count on its massive user base to tolerate just about any behavior on its part—failed to anticipate that the unprecedented good will they built with 1 billion users was not transferable to giant brand advertisers. Suddenly there was a big ugly problem. Users who were unhappy no longer felt they had no other options. The intrusions, data mining and privacy and permission transgressions users had happily (or seemingly) ignored when inflicted by Facebook were received quite differently when inflicted by advertisers. “Hey, these guys aren’t my friends Facebook. These guys want to SELL me crap—and won’t get out of my face!”
The advertisers were not viewed by the public as the same dispenser of free awesomesauce that Facebook was. A pernicious crabgrass was cracking the sidewalks in the formerly idyllic walled garden.
Intrusion, inconvenience and insecurity, it turned out, were batons that could not be passed—at least, not easily and profitably—to the advertisers.
In Q1 of 2015, following the surprise departure of founder Zuckerberg for reasons that only became clear later, the Facebook Board announced the company's sale on what once would have been seen as fire sale terms. The buyers were a global gaggle of investors including (among many others) Goldman Sachs, the prior Russian investors, a Saudi prince and a secretive Malaysian billionaire. The participation of a large Chinese manufacturing cartel was rumored but believed to have been worked through an unidentified straw. Larry Ellison, Richard Branson and Rupert Murdoch's heirs all reportedly looked at the deal briefly and took a pass.
By mid-2016, the social network, by now often the subject of open ridicule in both social and mainstream media, was referred to in headlines worldwide as "MyFace" or "MyFarce," a diss comparing it to the once prominent MySpace (which had been shuttered in 2013). Two of the three challenger start-ups were bought: the first by Microsoft and the other by an odd joint venture of AOL, Amazon and Pitney Bowes. Facebook's North American member numbers dropped precipitously. This allowed the competition to catch up faster. The third start-up became Facebook's heir apparent when Google made the first of a series of relatively small but symbolic investments. By the end of 2016 Facebook's successor gained the upper hand, with over 9% more North American members than Facebook. Conquering the rest of the world for them took a bit longer.
The new company’s success was attributed widely to three main factors: 1) world-beating application of semantic web functionality; 2) the richness of the user experience made possible by breathtaking design, breakthrough data architecture, and auto-configuring, real-time device integration; and 3) the company's unwavering devotion to the privacy rights and user configuration preferences of its user base. The fourth and often unstated reason for their success, of course, was the backing of Google, which didn’t hurt either.
Their new technology, which was both location- and device-agnostic, revolutionized and rejuvenated the retail industry. Suddenly retailers could focus 100% on the shopping experience at store locations, instead of the mundane mechanics of transactions. Stores became "shows" instead of places to queue cash register lines. Mobile devices became the side show barker, the coming attractions, the concierge, the register, the customer service desk and sometimes the delivery vehicle all rolled into one.
And so it was that the disrupter became the disrupted.
Thanks for the intriguing scenario. I confess to being perplexed at Goldman Sachs' $$$$ enthusiasm for Facebook. I grant you there is an enormous base of users, but where is the business model to support GS' interest in Facebook? Count me out. I took down my FB page and am happy to be on LinkedIn only. That makes me one of the less-than-zealous about social media, but I have better things to do.
Posted by: Barbara Weyand | 01/10/2011 at 09:43 PM