“Facebook aims to build community, which is noble, but it really wins on narcissism, that’s their secret sauce, and it’s primal.” Ken Goldstein looks at what Facebook must do to continue towards greatness.
I bought a small amount of Facebook in the IPO. It was a flyer. It was unscientific. It was counter-scientific. It wasn’t meant to be a life-changer either way. It was kind of like a lottery ticket, with a long time until the ticket would be drawn, and at the worst some remainder value on my ticket if I lost.
I really like Facebook. I’m addicted. I confess to being one of the first “grown-ups” on the site with an account going back to 2005 using a .edu email, investigating for business purposes (yeah, right). I love to write and I love to read so Facebook is made for someone like me. I tremendously enjoy sharing ideas, give and take, so that works for me, text more than pictures, it’s all good. I marvel at the ability to stay in touch with people from all phases of my life, kind of like sending Christmas cards all year round, and without obligation to respond when I don’t have the time. It’s a great platform. I have invested a tremendous amount of time in carefully building my friends list (100% known to me, so don’t friend me if we aren’t at least acquaintances) and my much too long list of Likes. I tried Google+ and it’s fine, I have an account and I post my blog entries there, but I’m not going to rebuild my Facebook network somewhere else, too much work, the switching costs are real. Facebook is doing the job for me. Not sure if I am doing the job for them, but we’ll get to that.
A lot of people asked me what I think about the > $100B valuation. Here is what I wrote as a comment on Facebook in response:
The question is whether you believe FB can grow into its valuation. The answer is, who knows, but the multiples are very tough on any kind of fundamentals. No one has ever had a proprietary audience of almost 1B, that’s unheard of. The questions are: 1) can they hold them, or at least the valuable ones, without alienating people on privacy or losing them to the next big thing; 2) can they attack TV ad budgets with innovative, targeted campaigns that are both effective and not off-putting; 3) can they diversify beyond display ad revenue into transactions, research, and virtual currency; and 4) how will they deploy their cash for accretive acquisitions, particularly in mobile. That’s a lot to do, but at least they know what not to do having studied those who came before and puttered out. History (AOL, Netscape, the portal wars, et. al.) would suggest no, but remember when the smart money bailed on Apple and called it for dead. Suppose FB triples profit this year and next — well, at this price they’d be trading at less than 10x income, which is still aggressive, but not out of reality for a high growth company (today’s price is “augmented reality”). You’re paying a huge risk premium, so you have to believe they can deliver against that — which is a question no one can answer, hence the risk premium. If you think FB will perform like MSFT, AAPL, GOOG, INTC, WMAT and be one of the greatest companies of the early 21st century it’s ground floor, if you think it’s a fad, it will be an expensive adventure. Gee, I think I just wrote a blog entry!
Let me add a few more comments about Facebook. I think they are doing a good job pushing the envelope on new horizons, but like all great software companies, they hit and miss. Facebook aims to build community, which is noble, but it really wins on narcissism, that’s their secret sauce, and it’s primal. People like to talk about themselves. And post pictures of themselves. We really, really do. Okay, maybe not everyone, some just want to stay in touch with their kids halfway across the country, or meet new people with common interests, or reconnect with a pal from elementary school, or keep tabs at their own risk on an old flame, or support a political cause. There’s a haute blend of secret sauces, but most of the recipe involves a chance to make yourself seen or heard where this previously required a lot more effort and guts.
The Like Button was brilliant, in one smooth swipe adopting the Fax Machine Factor — with each individual instance being more valuable as the aggregate network expanded exponentially.
News Feed was seminal, the turning point which bought them a shot at Built to Last. Initially resisted, it was bold and visionary, a finishing move against direct competitors. The true genius of News Feed remains the simple control that lets you quietly code out anyone’s posts that don’t interest you without hurting their feelings or having to drop them as a friend.
Facebook Connect was audacious. Imagine if any of the portals had tried this earlier, expanding global registration beyond their own confines to widen the walled garden, and having that embraced by would be competitors! All the web surfer experiences is they don’t have to create another user name and password, but if they want to do that, they still have the option (this is of course a two-edged sword, noted below under privacy).
Creating a robust platform for third-party app integration with an accessible and broadly supported set of APIs was sheer genius. Facebook knew they weren’t going to be great at everything, why not let others create games and tools that feel like Facebook without being Facebook?
How do we know these features were game-changers? Look how widely adopted and copied they have been. That’s the rest of the digital social world confirming you got something right, all to your benefit. On the other hand, true innovation at lightning pace means any developer will get some things wrong, and not be afraid of that. Facebook has proven it’s in the club, with some less than customer friendly features that need attention.
Timeline makes little sense as a consumer experience, perhaps it’s meant to be something else, a comprehensive framework to compile marketing data, I don’t know. What I do know is that it took away something useful, our ability to quickly scan someone’s self organized profile for affinity, and redeployed it as a pastiche of artifacts. It reminds me of what a resume is not — it’s not a memoir. All they had to do to make Timeline great was make it an option for those who wanted it and let the rest of us just keep our profiles.
The Facebook mobile app is not very good. It was late to market, and the user interface appears cobbled together. Data I/O is slow and cumbersome. It does not update predictably or stay current with alerts. It is still not optimized for tablet displays.
Privacy Settings remain pretty rough, albeit less so than one or two years ago. There was even a joke with Muppet stand-up comic Fozzie Bear going around Facebook on IPO day declaring the reason the company went public is, “They couldn’t figure out the privacy settings, either.” Granted the surprises of late have been fewer, but the third-party stuff via FB Connect can be woefully weird to control — do you really want your friends to see every song you’re listening to on Spotify or every article you’re reading on HuffPo?
This past week I spent a full day with some twentysomethings reviewing technologies that were and weren’t appealing to them for e-commerce. The discussion of Facebook was unlike anything I had ever heard, immensely contradictory. They could not imagine a world at any time in the future without Facebook, it was as much a part of their lives as food, which they currently couldn’t afford. Yet they admitted they were using Facebook less each year that went by since high school, and they expressed vast mistrust for the Facebook brand, terrified of what would happen to all the personal information they had unveiled and were becoming predisposed to hold back. How’s that for twisted logic? Can’t live without it, using it less, and minimal trust for the brand — some action items there for the development and marketing teams.
It’s barely the second inning for Facebook so there’s a lot of time to recover. Here’s my advice: win the trust war and you will go from being Good to Great. Edward R. Murrow and Walter Cronkite helped CBS get there — even when there was little question that what William S. Paley wanted was what the Man Men were selling. The namesake founder of my beloved corporate alma mater went on TV every Sunday night and became Uncle Walt, which resulted in many millions of folks subsequently vacationing at highly developed former swampland in Central Florida. Facebook can win a big piece of the ad game if trust is front and center, central and foremost, and transparency is not buzzword.
A motto like “making the world more open and connected” is cool, but be careful that these don’t just become words in your press kit, literally about 1/7 of the world is watching. Do it, don’t say it, win us over and hold us forever so your name goes on the list with the unforgettable. Miss that and the stock price will be the least of your concerns. Now you’re playing for legacy, where Like has to become Love.
I am purposely publishing this after a single day’s trading and before the market opens again. With the FB stock price a hair above the IPO price for a deal everyone desperately wanted, it’s now everyone’s deal on a level playing field. The only thing that will hold or improve that stock price over time is consistent greatness. It’s commencement. It begins.
photo: deakaz / flickr