The Blog

Collapse - The End of Facebook Is Nigh, And Why You Might Be Next

I have a dramatic and perhaps outrageous prediction: the end of Facebook is looming. Perhaps not this month, or next, but it's coming. And when the fall does come it will be swift, and it will be brutal.

I have a dramatic and perhaps outrageous prediction: the end of Facebook is looming. Perhaps not this month, or next, but it's coming. And when the fall does come it will be swift, and it will be brutal.

Now I realize at this point I might already have lost you. Facebook has over 1.3 billion users. It has become a critical part of the lives of roughly one in seven of the earth's population. It has the kind of cash mountain that allows it to snap up companies it sees as either threats or useful for billions of dollars. And there's a fair chance you might be reading this having seen the link on Facebook.

If you look at the headline indicators - massive user base, huge pile of cash, snapping up companies like a carbohydrate hungry super model grasping for the finger food at a gallery opening - then what I am suggesting might seem insane.

But if you look at the underlying indicators you see a very different picture. Facebook begins to look a little like the Kingdom of Rome just before it fell, when the consensus was that it was invincible. It is worth remembering that, just like the sacking of the mighty Latin Empire, very few people saw either 9/11 or the Credit Crunch coming, even though all the signs were there.

These signs are the leading indicators that many industries now need to keep an eye on and handle. We are living in an era of protracted disruption and change - a period when many established businesses are going to fall as new, and in many cases as yet unimagined attackers and innovators, emerge.

So what are these signs?

In Jared's Diamond's 2005 book 'Collapse', he identified four factors that led to the sudden spectacular collapse of what looked like mighty unshakeable societies. If we look at Facebook all four now apply.

1. Environmental change.

Facebook's developers have interfered with their online environment in the same way that mankind has interfered with the planet, gradually making it more and more hostile for those inhabiting it. What started out as a simple fresh space in which people could connect and share, has become increasingly oppressive. Facebook's army of User Experience Designers and Category Managers have taken something that was simple and worked very well, and started to sweat it, adding complexity, and then looking how to exploit it.

What is more they have slowly but surely changed sides. In the same way that the first shopping mall in Minnesota started out as a Utopian vision for a Scandinavian town under a roof and ended up as a soulless space designed to bewilder those that went there into buying stuff, so Facebook has morphed from the Utopian vision of a bunch of renegade college students into the online equivalent of a shopping mall crossed with a casino; all flashing lights and experiments to get our attention.

This continual tampering has left Facebook's users increasingly agitated. Like too many seedlings squeezed together in a darkened room Facebook's users are now stretching for the dying light, a madhouse of inspirational quotes, pictures of kittens, and selfies.

The result is that what started out as a few dissenting voices has now become a din - surely, there has to be something better than this?

2. Climate change.

Since the Global Financial Crisis the social and political climate has and continues to change dramatically. Edward Snowden and Bradley Manning might have been charged as criminals but what they unearthed has shaken many people's faith in their governments and institutions. Sure we buy into the idea we need protection from the bad guys but now it is beginning to look like the bad guys we really need protecting from are those that purport to be looking after us. The United States Government was found not only to be tapping the wires of potential terrorists but also the leaders of its greatest allies and most likely many of the rest of us in between.

Facebook like many of the other free-to-use digital giants has based its business model, and thus its sky-high share price, on being able to 'mine the data' of its users. In plane English what that means is build a database of your interests and habits and then try and sell you stuff - what is more, as it is a networked model, sell stuff to your friends too. This is about as comfortable as when one of your friends gets involved with one of those multi-level marketing companies and starts trying to sell you over priced herbal remedies at a cocktail party. It means the fundamental foundation on which authentic friendships is based on - trust! - is broken.

What this means is the sensibilities of the wider population and Facebook are heading in opposite directions. The social climate doesn't support the kind of thinking on which Facebook is building its business, and it is only going to get worse.

3. Trade partners.

The trading partners of a social network are actually the users and Facebook has made a huge mistake by forgetting that. It has started to relate to them like old school customers rather than people it is out to help.

It has forgotten the key insight from previous booms: that those that make their fortunes out of a gold rush are not the people prospecting, but those that sell them tools. Facebook's success came from providing the tools that helped its users connect and share with others - be it sharing photos, sharing status updates or messaging. Its problem though is it didn't charge for using these tools and this is where it has got into a bind.

When Whatsapp launched part of its success was based on two fundamental promises - one, that it wouldn't collect data about you; two, it would never expose you to advertising. This made it phenomenally popular. How it made its money was from a one-off upfront fee. Facebook's answer to the threat Whatsapp posed was not to copy it but to snap it up. It is now in the uncomfortable position of having paid a staggering $19 billion for a product whose success was based on the very opposite of the principles its future business model is based on. Its solutions seems to be to run Whatsapp as some sort of lab while launching what its essentially a rival product - its own mobile Messenger app.

In doing so though it has committed another cardinal sin - it has forced people against their will to use the new product thus making their mobile experience far worse, while sending out a very clear message - we are out to collect data about you. What was once a symbiotic deal between user and provider has now become a trade war and those never end well.

4. Hostile neighbours.

Facebook has risen like many empires to become a singular dominant force, crushing and sidelining all other contenders. In many ways it now seems unassailable - it has the financial clout, technology, and incumbency to ensure it can beat all that come before it. Here though Rome again is a good metaphor. In the same way that Nero fiddled while Rome burned, Facebook's User Experience Designers are fiddling while its user base burns.

So far potential attackers have been rebuffed, assimilated or fallen away. 'Path' gave it a good go before being snapped up and then neutured by its new owners desire for scale.

Each new pretender though gets stronger and it won't be long before one or more turn up with the tenacity to turn Facebook over in the same way that the Germanic tribes - the evocatively named Huns, Vandals and Visigoths - sacked Rome. The latest contender is 'Ello', a fleet footed David to Facebook's Goliath.

Will 'Ello' be the one to topple the giant? It is generating more noise and users far quicker than any that have come before.

Maybe. But more likely it will be another breach in the wall. In the same way that Rome was turned over by a gaggle of tribes, so it is more likely that Facebook's demise will come when a tipping point of users hemorrhaging to a number of different places is reached. It will be these new players ability to integrate that will probably be the key. As soon as the Facebook stadium begins to feel like it is emptying, the party will very quickly end.

It would be easy to believe that these four rules laid out in Collapse don't apply to high tech businesses in the same way that they do for real world communities. That somehow the digital world is different. But there are already precedents. In the early 1980s the gaming company Atari was the fastest growing company in American corporate history. Just a few years later, after a spectacular collapse in its market, it was all but gone - living on as a brand name only.

Facebook has done what many other empires have done before it - it has overreached while taking for granted those that helped make it great. Meanwhile the global consensus has shifted around it leaving it dangerously overstretched and exposed.

While Facebook is experiencing the beginning of a particularly ferocious looking perfect storm of changing social, economic and competitive circumstances, it is by no means alone. It is at the forefront of a trend. Traditional industries in many sectors are now feeling the same heat.

Qantas is the latest in a long line of airlines in rich nations to suddenly look very shaky indeed. Here we see another perfect storm brewing. The social landscape has changed - we are no longer prepared to loyally fly the flag if the service or price is not as good as competitors; the environment has changed - deregulation and a new low cost model have disrupted the status quo; the employee landscape has changed - unionized western employees don't want to play the same game as Asian and Middle Eastern crews just glad to have a good job; and fierce and hostile competition has arrived in the shape of low cost short haul and government sponsored long haul carriers. Trying to forge alliances with other big airlines is a good first move, but if Qantas is going to thrive again it needs a far more fundamental shift than code and infrastructure sharing. It needs to build a whole new relationship with its customers, workers and suppliers.

This confluence of changing critical indicators is beginning to show up in sector after sector. We are living in a time of disruption, one that is ripe for new kids-on-the-block and attackers, and things are only going to get more extreme. For big companies that have grown up used to being in the driving seat it requires a fundamental shift of attitude if they are to survive; a shift that requires a very different set of values and skills. Building alliances with customers, like-minded competitors and NGOs will become a vital capability. Building businesses that have a profound empathy for their customers and stakeholders will be critical.

Can Facebook make this shift? Maybe? But it will require a juggernaut to pivot like a skateboarder and that is a pretty hard move to pull off. But if it is prepared to put up its hands and say 'we really need to change' maybe it can. Humility is still not seen in many corporations as a strategic asset but in a time like this it is a leaders greatest strength.

In my work I am seeing it takes bold, strong and enlightened leadership to accept that how they have been operating is now totally incompatible with the new networked age, that they need to both confront and empower their workforce to think and operate in a completely different way. Some have started on this journey, but many others are clinging to the past, hoping that things will go back to the way they were. If they just hang in there.

Well they are not going to.

Many businesses, particularly in the developed world, are sleepwalking to extinction. The ones that will be still thriving in ten years time are the ones that are able to realize that - like Facebook - they need to learn how to work in partnership with their users, customers and critical stakeholders not against them. That they need to learn how to exert soft power not hard.