Facebook profits are roaring ahead. One insider says that the social network's profit in the first half of 2011 was some $500m (c£300m) - almost equal to that for the whole of 2010 - on revenue up to $1.6bn (£1bn).
Founder Mark Zuckerberg told buzzing delegates at last week's F8 conference of developers, journalists, and staff in San Francisco, that Facebook's proposed IPO would not now happen before late 2012. But he was bullish about the new plans "to become a complete social platform that will enable hundreds of people to live their lives inside Facebook...Millions of people curate stories of their lives on Facebook every day and have no way to share them once they fall off your profile page...we have been working on 'Timeline' all year...it's the story of your life and a completely new way to express yourself. It has three pieces: all your stories, your apps and a new way to express who you are." And he announced a new milestone: 500 million people used Facebook on a single day recently. 'Facebook is powering ahead' was the mood music.
The socially-awkward Zuckerberg (still only 27) left the stage - err awkwardly - to the rap strains of "All I Do Is Win" from DJ Khaled. And why not? After all, Facebook has more than 800 million users, 75% of them outside the US. And, finally, it is starting to coin it. Forget what the world's biggest advertising mover, WPP's Martin Sorrell, is saying about the promotional limitations of Facebook. Diageo, the Smirnoff-to-Johnnie-Walker-to-Guinness drinks combine has been euphoric about sales generated by the network; and British Airways, which also knows a thing or two about advertising media, is launching its new commercial not on TV but on Facebook.
So, Facebook is on fire. Right? Well, perhaps, but...
A trawl around the web tells a slightly different story. The blogs and user groups are running hot with moans about Facebook and its proposal to own "the story of your life". Any regular business sparking the same kind of online vitriol would have been out there hosing it down with PR and diplomacy. But, then, Facebook is not a regular business.
Listen to this one: "This is great. Now I can view your entire life timeline quick and easy and find out where you were born, which schools you went to, where you have lived, where you have worked and family members' names. I can learn everything about you, then take that information and get myself a birth certificate in your name, open a bank account, take out a mortgage all in your name HeHe - if I were a criminal!!!!!!. OR I could just follow your Timeline, look at your pics and see what days/times you like going out at and go rob your house OR wait until your Facebook updates and tells me when you start watching a movie so I can sneak in the bathroom window while your distracted - awesome!"
Slightly more down-to-earth, another blogger screamed: "One of the biggest changes is media- related, showing what you're watching and listening to; and Facebook will use this information to make billions by allowing music/movie/games companies to view it and bombard you with ads. Facebook has had its time and I predict there will be a new kid on the block soon and Facebook will fade away just like Myspace did."
Online opinion polls showed that Facebook users overwhelmingly disliked the changes to their favourite site. Some have called it "a stalker's paradise".
But, even by the standards of the web, where regional enthusiasms can so quickly become international obsessions, Facebook is amazing and cannot be written off lightly. But, even while it is still growing, there now are real reasons to believe that Facebook may just become the next web wonder to go down the drain. Believe it or not.
It is a bold prediction, of course. But it is based on five reasons which underline how the world's largest social network is losing its grip on the huge worldwide community it has built in less than eight years:
- Facebook is losing its cool.
It is just too successful. What started off as a community of students sharing their pictures and news, first in the US and then worldwide, is now used by almost everyone. A quietly alarming 25% of US grandparents (and countless parents worldwide) are on Facebook: not cool for students and kids. My own student daughter echoed the mood of her friends: "Absolutely everyone's on Facebook...we want something of our own." But there are plenty of other reasons why Facebook risks losing its cool - and its place at the head of the web pack.
- Facebook is trying to do too much.
It was originally about sharing photos and connecting with people. But, driven by security and (one suspects) also by the commercial desire to collect members' information, it is actually now impossible: to share pictures; to connect with people before answering questions about how, why and where you know them from: and to avoid having to answer prying questions like: "Joanna says you met her at XYZ school, is that right?" On the new 'Timeline', users will be able to see their entire Facebook history, including changing lists of friends. So people will be able to see which previous friends decided to end the relationship and when. Not the kind of detail most Facebook users would want to see publicised - and retained in perpetuity. Expanding in a strategic and bumpy way (listen to the howls of protest at the rolling changes to Facebook's look and feel these past few months) is helping to remind users that the "community" is not their's after all - but a business that changes when it wants. It's not the message Facebook really intended, and many users will believe what it seems to say about the network's predatory ambitions.
- Facebook is getting scary.
Zuckerberg's self-declared ambition is to build "the largest index of people that has ever existed". Government censuses (in those countries which have persisted with the quaint custom) routinely collect data on ethnic groupings, professional and family information, often stored anonymously. Well, Facebook will be able to draw on much, much more. Your tastes in food, music, fashion, diet, exercise, love life, family life, media consumption, travel plans, and location can all be at the fingertips of any major corporation to which Facebook wants to sell the data. This "life tracking" might create the following intrusive scenario in inboxes around the world: "Do you remember Pampers? We know you used them as a child - here's a picture to prove it. Why not buy some now for your 1 year old boy Sean. And we hope you enjoy celebrating his birthday tomorrow." It's the ultimate direct marketing,of course, but you would not need to be a data protection obsessive to be apprehensive about it.
- Facebook is getting way too commercial.
Nobody thinks Facebook is a public service, well not too many people anyway. But the network has grown rapidly on a wave of quasi 'user ownership'. Zuckerberg's personality (and even that riveting Social Network movie) have helped create the illusion of the "people's web". That may be the same spell that was broken when in 2005 the once all-conquering Myspace was bought for $580m by Rupert Murdoch's News Corp. Many young people were genuinely surprised that Myspace could even be bought. But, when Murdoch trumpeted a big new advertising deal from Proctor & Gamble to show just how profitable he thought Myspace would become under News Corp ownership, the writing was on the wall. Sure enough, a broken and battered Myspace was recently sold for a mere $35m after 6 dismal years. Perhaps, the sign that Facebook is getting too big for its servers is what we might come to call the Diageo Moment. The Smirnoff et al maker tried to add (even more) lustre to the F8 event by being, well, intoxicated with success. It breathlessly announced a 20% increase in sales "as a result of Facebook activity".
That's an injection of 'uncool' for kids everywhere and not great news either for parents and grandparents already edgy about the Facebook risks of "stranger danger". It has to be assumed that there will be much more advertising-related stuff bubbling up through Facebook in the 12 months leading up to the company's likely IPO. Many Facebook users have sort-of thought that Zuckerberg's insistence on taking a low salary translated to altriusm. But it won't look like that when Wall Street ramps up the value of his shares - and in the months of speculation and trafficking before the stock market debut. A nightmare scenario for the Facebook image.
- Google Plus is muscling in at the 'perfect' time.
The sheer scale of Facebook's success and its now-soaring profits were always certain to prompt competitors into action. And Google's shiny, new social network looks like a real threat. The service, which has been visibly tested for months, opened to everyone last week. The second-week data shows it might already have 43 million users. There has certainly been a rush to try it out. It is way too early to draw any conclusions yet about its eventual success - or even where it will be in a few months. But you have to believe that Google is launching a nice and simple service at a time when many Facebook fans wistfully remember how it used to be at Zuckerberg's. In some ways, of course, it also seems a bit rich to wax lyrical about this brand new alternative to the "predatory" Facebook, given Google's not always "right on" world-domination of web search. But these are times when the business life cycle can be mercilessly short even for the brightest stars.
Nobody can be sure what happens next. We only have a few of the internet's highest fliers to compare. Inevitably, Myspace was a spectacularly tragic example but it was nowhere near as large as Facebook and was overwhelmingly American. By contrast, the ever-more-pervasive Twitter, is stronger for the absence of the visible ownership or commercial motive that is now coming home to Facebook. Twitter continues to wear the badge of apparent 'user ownership', now ditched by Facebook.
Facebook's underlying problem is, quite simply, that it is not quite what it seems and has been outed. Hundreds of millions of users round the world have come to think Facebook is not really a business but their own community (created, after all, by them). Consumers everywhere might have to put up with Coke changing the shape of the bottle or the stuff inside. That's what businesses do, right or wrong. But how do the Facebook faithful explain to themselves why "their" company is now changing so much, whether they want it to or not? And, now, it isn't even listening to them...
Well, you won't hear Facebook saying it is making changes so as to ensure longterm profit growth, increased market share and success in new markets. That is what other businesses do, and Facebook is not like that, right? Wrong. This is "own up" time for Facebook, which is huge and will certainly take some shifting, no matter how clumsily it now moves through the gears. But the warm glow is evaporating (to mix a couple of metaphors) and so Zuckerberg et al will increasingly find themselves competing in a very commercial way. Google might just enjoy that stoush. And who knows what kind of quasi not-for-profit operator may be waiting in the wings to juice up the action some more?
A fight to the death has begun.Suggest a correction