By now everyone with access to the Internet (and even a lot of people who don’t) are aware that Facebook filed for an Initial Public Offering.
If every other social networking platform in the history of the web is a guide, this signals the beginning of the end for Facebook. Private corporations are freer from the pressure to drum up wads of cash in the short term than publicly-traded companies. They are also more resilient in the face of economic challenges than private companies because they can absorb a period of shrinking profits instead of scrambling to implement drastic measure (like mass layoffs) to quickly cook the books for a pennywise short term jump in profits.
Here’s why Facebook will suffer from the rush to monetize the gigantic community of users it has amassed:
1. Muted Voices of the Creators and a Lack of Responsiveness
For all of the negativity directed at Mark Zuckerberg and his team, they’ve done a spectacular job at resisting a headlong rush into cashing in on Facebook for years. I can think of few other enterprises that have resisted the pressure of investors to capitalize on every single asset for so long. They’ve also sheltered and nurtured a mission and vision that has been highly user-focused (which is also what is responsible for their popularity).
Over the years, Facebook has made a variety of gaffes that have upset users to the point of open rebellion using the social network’s own resources against it. From Beacon to the newsfeed, they’ve been accountable to the users and have rolled back or reversed some of their decisions. It will now be much more difficult to resist the pressure from users to undo unpopular changes because there’s a lot of money riding on upcoming decisions that is in the hands of people who could care less about the user experience.
2. Decline in Community Management / Customer Service
Every single social networking platform I’ve ever been a part of succeeds primarily because of the careful attention paid to the needs of users. When a company goes public and the focus shifts to making From blocking spammers to silencing trolls, there is no algorithm (yet) that can fill the task of a human being in weighing complex amounts of data and reaching a judicious decision.
As soon as Facebook’s ad revenues start to dip, there’s going to be a call to pull a lever and lay off as many employees as possible to cut costs. These inevitable staffing cuts will also affect innovation at the company (something any large organization is challenged with already). Even as a private corporation, Facebook was unable to resist the pressure to open itself to the general public (much to the disdain of the elite group of college-educated or corporate-sponsored who used to be its sole inhabitants). Nor was it able to resist the pressure to open its vast trove of data to the prying bots of search engines like Google.
The rush to cash in on Facebook’s users may also come at the cost of democracy – will Facebook be able to resist the fiscal pressure to give “more democracy” to those who can pay for it? Right now, ordinary citizens and small business exert equal power over the platform as any multinational conglomerate. That may not be the way in the future. What I mean is, we all have an equal voice: if I want to criticize a company for poor customer service I can do so within view of my friends and connections. What do you think it would be worth to an Apple, Coca-Cola or McDonald’s to be able to pay for the ability to globally mute (or at least reduce the EdgeRank score of) all negative references on Facebook? (Consider: most people likely wouldn’t even notice this happening).
3. The Evisceration of Privacy
If you were worried about Facebook’s standards for privacy before, you can basically now assume every marketer, government agency, and data miner has access to everything you’ve ever done on the platform (and many things you do away from Facebook, as the Electronic Frontier Foundation has documented). With or without cookies, with or without agreeing to the terms of Facebook’s apps, your activity is being cached and it’s only a matter of time before the pressure to monetize that data crushes any internal opposition.
You don’t need a tinfoil hat to be worried about the prospect of monetizing Facebook’s data; consider if you’re an activist in a foreign country operating under a pseudonym – how long do you think a publicly-traded Facebook will be able to resist dumptruck loads of money to hand over that information to cough up the data that readily identifies who you are and where you’re accessing the Internet from?
For a long time, the strikingly-relevant ads we see on Facebook have been a minor annoyance. That will change as more advertisers shift from traditional media to social media. How long before people get creeped out by drug manufacturers pitching them on the pills they’re taking? How long before pitches tailored at parents that reference their children by name start to raise hackles? How about insurance claims investigators buying access to social streams of policyholders to sniff out potential fraud (or worse, deny coverage for mentions of telltale serious illnesses). All of this isn’t just possible – it’s inevitable.
Facebook is already large enough that it has been able to withstand the strident outcry about its privacy measures, which means that the only entity that will be able to hold it accountable to the demands of citizens is the US government. They know this, which is why they dropped more than a million dollars on lobbying last year – likely a first step toward buying themselves legislative immunity as so many Wall Street banks have done.
4. Woe Unto the UI
When Facebook first went live, its appeal over MySpace was two-fold. First, it had a much cleaner and more attractive User Interface (UI) than MySpace (which somehow manages to continue the uglification process long after it’s bled tens of millions of users). Second, it was a gated community only for the college-educated.
As we’ve seen, the UI has increasingly been cluttered up with ads, pitches for apps and other commercial products, and other components the average user isn’t interested in. As with all other forms of advertising, we roaches (ie consumers) eventually become resistant to whatever roach spray (ie advertising) we’re presented with – so there’s a perpetual arms race for more obtrusive measures of capturing our eyeballs (check out these fascinating heat maps of what the average user looks at on a Facebook profile, courtesy of Mashable).
5. Wolves at the Gate
There are no shortage of competitors to Facebook, with more being coded every hour of every day around the world. Google+ appears to be the heir apparent and continues to grow in size (it now has 90 million users) despite the hilariously-frequent doomsaying about the platform.
As I’ve written before, this is much more of a problem to a digital service provider like Facebook because it can’t use the traditional measures to bind customers to its product (the way cell phone companies lock people in to 2-year contracts with discounted phones). If I want out of a social network, it’s easy to leave – there are automated applications online (like Backupify) that will even do the job for me (and the more people who want to leave, the easier it will get).
6. The Bubble Will Burst
Right now there’s an irrational frenzy of interest in buying Facebook stock – just like the frothing demand for dot coms in the late 90s. Market analysts like the Wall Street Journal’s Steven Russolillo are crunching the numbers and they’re sobering (“Facebook IPO: Should you Invest in it?”). As he notes, even a more banal IPO like Linkedin built up unrealistic expectations and hasn’t yet returned to the $122.70 it commanded on its opening day.
Those unrealistic expectations will magnify the damage done to Facebook’s quality of service as investors press the company to adopt unwise strategies to boost short-term profits at the expense of long-term viability.
When I talk about “the end” for Facebook, I don’t mean that the company will fold. Even MySpace is still a viable platform for human expression despite being bought for $580 million by News Corp and sold off six years later at the fire sale price of $35 million.
What I do mean is that the golden age at Facebook is over. Perhaps it’s even been over for a while – for the past couple of years I’ve seen telltale signs of malaise from early adopters about the platform. I think I’ll head over to Google+ and see what they think about this post…