Monday, 4 July 2011

Too big to fail?

Since I wrote this post on the Brilliant Media blog, I've heard one argument a lot, in various forms, in favour of Facebook being with us for good.

People seem to divide broadly into two camps...
  1. People who think - even want - Facebook to disappear and are waiting for the crash (in case you hadn't guessed, I'm in this one)

  2. People who think Facebook isn't going anywhere, because it's now 'too big to fail'

As an example of this second camp, the BBC's Rory Cellan-Jones gave us a quick mention on his blog (thanks! That will do wonders for the SEO) but dismissed the argument that Facebook was now vulnerable and could go the way of Myspace, saying

"I don't really buy that - Facebook is far more widely used and cemented into millions of people's social lives than MySpace ever was."

Essentially, Facebook won't fail like Myspace did, because it's bigger than Myspace ever was.

This is going to be pure opinion - no data this time, sorry about that - but I'd like to expand on why I don't buy this 'too big to fail' argument.

Firstly, I've seen no evidence to say at what size something becomes an inevitable part of our lives for at least the forseeable future, particularly on the web. At the time, everybody thought Myspace was pretty huge and Newscorp paid $580m for it, so at least somebody thought it was a good bet for the future. Facebook is bigger, of course, but the fundamental model of what it does is the same. It just does it with real names and a better user interface.

We think Facebook's huge, but it only really covers the private aspects of our lives. Work networks are what Linkedin is for. Imagine a platform that did everybody's working and private relationships (Google +? At this stage, who knows?). It's just an example, but that would be a far better commercial proposition and potentially be far bigger than Facebook. I'm not saying it will happen, just showing that there is a potential network out there that's bigger than Facebook, so the 'this one's too big' argument doesn't wash with me. We may not know what 'big' looks like yet...

By training, I'm an economist and so I'm interested in the motivations for why people and businesses do what they do. Rather than looking at something big and saying 'wow, that's huge, it will be here forever!', I'd rather talk about why people use it now and whether that might change. Economists talk about barriers to entry - how easy is it for a competitor to set up and to do what you do, only better?

So why do we use Facebook?

That's easy, it knows our network and who we like to connect with. Once you're connected, it can do messages, photos, chat, games... all the things we like to share.

So I use Facebook to share. I use Facebook to share because everybody else uses Facebook to share. And so do you.

The single barrier to entry for a competitor is that it's hard for somebody else to duplicate your network and that even if they built the world's most stunning social platform, it's no good unless your friends are on it too. Statement of the obvious, I know.

Other web tools have better lock-ins than that. Flickr has a massive storage of photos, that it would be a pain to move. For me, Blogger has this blog, which I'm unlikely to put in the effort to migrate (I still might though.) Facebook, almost by definition is very current. Its content is transient and I don't need to take any of the stuff it stores with me when I go, except for the network. Sure it stores lots of photos, but it's not very good at it and I only used it to share them quickly. They won't need uploading again or they 'd already be held somewhere better and just linked to from my Facebook page. Do you love Farmville that much? Or was it a diversion for a few weeks before you moved on.

Regardless of some people now actively wanting Facebook to fail - which I think is a dangerous sign for Zuckerberg - I don't think that network effect alone is strong enough to insulate Facebook.

Let's take Google+ for a minute. I'm absolutely not saying it 's the Facebook killer (see my last post) but it's a useful example. Google are taking a softly, softly approach to social this time and I think that's the right way to go. As a start up, you can't compete with Facebook all at once, but you can attack chinks in its armour through micro-networks.

Looking at a few personal examples, my sunday league football team tried to use Facebook to organise games and practice sessions, but gave up. It doesn't matter why it didn't work, but it didn't. We drifted back to email and I'd say Facebook's vulnerable for organising teams and events. Interestingly, Wave could potentially have done a cracking job, but never quite got going.

I paraglide whenever I can and love to share photos and videos with other pilots. Quality is important here and Facebook's just not up to the job. I'd also like to be able to build a looser network, who I wouldn't want as Facebook friends because they're acquintances at best, but I'd like to see their videos and read their tales of good flying days and they'd like to see mine (I hope.) Facebook can't do that. Google+ might be able to and it's definitely another chink in the armour.

My prediction is that Facebook will start to see it's base nibbled away at, by better organisation of micro-networks until somebody else builds a critical mass and then they'll see their traffic drop off a cliff over a couple of years. The Brilliant Media blog post was intended to show why I think we may just have reached the tipping point, where Facebook becomes vulnerable. Yes, Facebook could build those features, but their platform is starting to feel big and slow and complicated and there's no way they'll be contemplating a re-write from the ground up. It's the same problem of inertia that means Microsoft can't do phones and tablets.

By all means argue. I've been wrong before... But I'm interested in hearing why it wouldn't or couldn't happen, beyond 'Facebook's too big'. At least lets discuss what 'too big' means. Which parts of Facebook are now so big they're invulnerable?

1 comment:

Kyle Barger said...

I also don't buy the "Facebook is too big to fail" argument. (Though it may have potential as a self-fulfilling prophecy.)

Another consideration that I don't think is well-understood is the role fashion or faddishness plays. My kids are all about Facebook now. My parents signed up specifically to stay in better touch with them (and, more so, my nephew stationed in Afghanistan).

So what happens in a few years when my kids are in college, and linked up through old, stodgy Facebook with their parents and grandparents? I've always felt this dynamic would make Facebook--like Myspace--vulnerable to a hip, with-it competitor that could capture the college demographic and stay with them after they graduate.