By Jon Evans
Two years ago I wrote a post entitled “Can Anything Stop The Facebook Juggernaut?” in which I marveled at the fact that Facebook (NASDAQ:FB) was then worth a whopping $35 billion, according to Second Market. Today, after its much-touted stock price “collapse,” the company is worth roughly $51 billion. It’s a strange world when a market-value increase of $16 billion/~45 percent over a two-year period is somehow perceived as a crisis.
My answer then to that post’s titular question was a grudging no. (My assessment of Facebook as “relentlessly mediocre” remains unchanged today.) Which remains true, in the short term. Lately, though, I’ve been thinking about the medium and long term — by which I mean 5-10 years and 15-30 years from now; the tech world changes so quickly that anything beyond that is sheer guesswork — and trying to imagine when, how, and if Facebook will wither away.
Warren Buffett always advises investors to buy a company with “moats” defending them from competitors, and Facebook has one of the deepest and most dragon-laden moats in the world. First, of course, there’s the network effect; with a billion active users, everyone goes there because that’s where everyone is. (Of course, there are individuals and subcultures who avoid FB — perhaps quoting Yogi Berra, “Nobody goes there any more, it’s too crowded” — but whether they like it or not, they’re a tiny minority among the networked of the world.)
Second, their Open Graph strategy means that Facebook isn’t just Facebook; they’re woven into the bones, and in some cases arguably the DNA, of millions of other apps and web sites. Every “Log In with Facebook,” “Share to Facebook,” and “Like” button across the Web and within every app store is Facebook territory. They don’t just own all the end users: Developers, executives, marketers, startups — they all want access to the Facebook empire, which means, to a considerable extent, becoming part of the Facebook empire.
Third, they’ve already seen off the most immediate threat, that of a direct assault by their most dangerous competitor. I refer of course to Google+. Which isn’t dead, but could hardly be described as thriving. Knee-jerk Google (NASDAQ:GOOG) defenders tend to say things like “Google+ can’t possibly fail, it’s just a social layer on top of Google,” which may be true but it’s also nonsense. G+ was clearly intended as a social network that would supersede Facebook as the place where most people go to share their lives and thoughts with friends and followers, and it failed at that.
Finally, they seem to be incredibly paranoid, which is a good thing. Consider Intel (NASDAQ:INTC), arguably the longest-lived successful company in the history of technology. That’s at least in part because of Andy Grove’s motto, “Only the paranoid survive.” I strongly suspect Facebook spent more than half a billion dollars to buy Instagram — a company with 12 employees! — because they’ve already imagined one way that they could die.
I call it “Creeping Defection.” If all their users also join another network, even one that focuses on a niche, then that competing network could conceivably grow into a full-fledged social network, and Facebook’s users might find themselves spending less and less time on Facebook itself. In the end, they would leave Facebook without ever really consciously intending to do so. That was Google’s hope, but unfortunately for them, G+ never really took off. Instagram seemed to be on that kind of trajectory, so they had to be dealt with. Just in case.
This leaves, I think, only three ways that Facebook’s dominance could be shaken.
The first is in some ways the most obvious, but also, to my mind, the most unlikely: that their users turn away. There’s no shortage of reasons propounded by the anti-Facebook crowd. Because they gnaw away at their users’ privacy more and more with every passing year. Because they’ve sold their soul to advertisers. Because they’re anti-pseudonym and pro-censorship. Etcetera, etcetera, etcetera.
The sad truth, though, is whether they’re frogs in a slow-boiling pot of heavy-handed, anti-privacy water or whether it’s only Internet activists who think that these sorts of things really matter on social networks, most users really don’t care. Absent some kind of melodramatic revelation that Facebook is selling its data to al-Qaeda, or that Mark Zuckerberg and Sheryl Sandberg are really Kang and Kodos from The Simpsons, Facebook user revolts will be temporary and limited as long as Facebook backs off of its crusade for “more sharing!” when necessary. They always do — only to relaunch them some years later, of course, when their users are ready.
The next possible doom is more plausible — and actually testable — but the data required is data that only Facebook has, and last I checked, they aren’t sharing. It’s possible, though, that social networking is something that people get bored of; that after the first few years of watching your friends share memes and cat pictures, it becomes more chore than joy, and people find themselves drifting away to more tangible pursuits. Facebook knows the answer to this one; they can tell if there’s a negative correlation between how long someone’s been a Facebook user and how often they visit and interact.
If so, then it’s possible that Facebook use might wither away as people do grow bored of it. Maybe they’d potentially be driven away by desperate Facebook attempts to bring them back. Or maybe a few competitors might attack the social network’s last line of defense: its de facto status as one’s defining online ID. This attack might come from, say, Apple (NASDAQ:AAPL), Google, Mozilla and Microsoft (NASDAQ:MSFT) forming an ID service that works across Android, iOS, Chrome, Safari, Firefox and IE. Unlikely, I know, but not impossible.
One attack I don’t think is possible is that long-held dream of Internet activists: a federated social-networking model, where your identity and your data can live at the provider of your choice, communicating with other providers through a common protocol. As an example, imagine if Facebook, Twitter, and Google+ all played nicely with each other, so you could open one and see anything/everything shared on the other two. But federated protocols with many players, by their very nature, innovate more slowly than authoritarian central sites. (To an extent that’s why Twitter has clamped down on its once-thriving ecosystem of Twitter clients.) Such a federated model would never catch up.
So the only thing that I think will actually kill Facebook, in the end, is the same thing that’s slowly killing Microsoft today: a platform shift. Not the shift to mobile; they’re riding that one out nicely. The next platform shift. When it happens, maybe Facebook’s death spasms will finally trigger a long-awaited spate of innovation and creativity from them, as seems to have happened in Redmond of late. If I were a betting man I’d put my money on wearable computing as the platform of the future — something like Google Glass plus Kinect, bearing in mind that each of those is but the Altair II of its field, and I’m talking about their descendants a decade or more hence.
I doubt Facebook will survive that shift; but at the same time, it’s hard to imagine something else replacing it between now and then. The world is yours for a decade, Mark Zuckerberg. Enjoy it while it lasts.
Image credit: Thos Ballantyne, Flickr.