Why Facebook?

[Tortoise]

This topic has doubtlessly been discussed ad nauseum online, but I was interested in hearing the opinions of the unusually thoughtful and intelligent people who frequent this forum.

Why did Facebook succeed whereas its predecessors--previous social networking sites like MySpace and Friendster--failed?

Why Facebook?

The basic concept of allowing people to socialize online by creating profiles with photos, personal information, and interactive pages/walls was not a profound technological innovation; the potential to create web sites like that were inherent in the Web itself. The capability to create social networking sites has existed since the Web first started to become popular in the mid-1990s. Most internet users back then simply had no interest in sharing their personal identities online; the online experience was all about anonymity. "Social" sites existed, but they were full of screen names and avatars, not real names and faces.

I'm thinking two main things had to happen before a wildly successful social networking company like Facebook became possible:

• Usage of the internet among the general population had to reach a critical threshold
• The dominant culture of the internet had to shift from one of anonymity to one of personal candor

As soon as those two conditions were met, I think it was only a matter of time until social networking became a juggernaut. At that point, someone--anyone--just needed to develop a reasonably simple social networking site with a reasonably simple user interface in order to seize first-mover advantage.

That "anyone" turned out to be Mark Zuckerberg and his Facebook idea. He happened to be in the right place at the right time with the right user interface in order to catch that cultural wave and ride the first-mover advantage all the way to fortune and glory. If it wasn't Zuckerberg, I think it would have been somebody else. The culture demanded it. Social networking was simply an idea whose time had come.

[Gosso]

Why did Facebook succeed whereas its predecessors--previous social networking sites like MySpace and Friendster--failed?

I have never used MySpace, but I was an early user of Facebook.  I think what made Facebook successful was its limited access during its early years.  You had to have an e-mail address at one of the approved Universities before you could open a Facebook account.  This gave it a sense of being special and you felt like a part of the "in-crowd".  This made it cool, and people wanted to be on it.  Eventually they opened it up more and more.

I used to use it a lot back in school, but now I almost never use it (especially once my parents signed up ).  I have a look when I'm bored, but I don't actively participate.  

MySpace always had a kinda creepy vibe to it, since anyone could sign-up.  This clip from "Super Bad" shows this well (0:38 - contains f-bombs)): http://youtu.be/5lpBlgRNKtY

[MediumTex]

I do not think that Mark Zuckerberg has long term viability. 

I do not think he is Steve Jobs (i.e., a borderline asshole visionary with talent and taste).  I do not even think he is Bill Gates (i.e., a borderline asshole visionary with talent but no taste).

I think that his "vision" is fundamentally pathological--it consists mostly of finding a simple way for people to waste massive amounts of time.  I don't think that he even has anything to "sell."  What he has done is erect a toll booth on a road that people will soon figure out is not a road at all, but rather an imaginary path around which there is no real intellectual property protection.

I also think that the "big swinging dicks" on Wall Street are completely sick of all of the attention and adoration given to Mark Zuckerberg.  I think that the whole "I'm CEO bitch" sort of stuff has made the Wall Street community want to feed him some humble pie.  That's just my intuition.

Also, how much more growth in its user base can Facebook realistically expect?  Sooner or later you simply run out of humans with access to a computer.

[moda0306]

Not that we like to use technical indicators, but depending on what site you look at, Facebook has somewhere between 75 and 100 P/E ratio, which translates to about 1%-1.33% earnings yield... this is based on the less-reliable 1-year.  Not the P/E10.

I am wondering what their earnings projections are to warrant anywhere near their current price. 

[jackely]

I think that his "vision" is fundamentally pathological--it consists mostly of finding a simple way for people to waste massive amounts of time. 

I don't get the wasting massive amounts of time part, MT. I check my facebook account about once per day to see if any of my friends posted anything interesting and if I read something interesting that I think they might appreciate, I post it. Actually, I invest about the same amount of time as I do with this forum and I don't see any of my friends doing much different.

[AdamA]

I think that his "vision" is fundamentally pathological--it consists mostly of finding a simple way for people to waste massive amounts of time. 

I don't get the wasting massive amounts of time part, MT.

You know anyone who plays Farmville?

[Gumby]

If Facebook were invented in the '90s...

http://youtu.be/xrYRH3PYYT0

[Tortoise]

I have never used MySpace, but I was an early user of Facebook.  I think what made Facebook successful was its limited access during its early years.  You had to have an e-mail address at one of the approved Universities before you could open a Facebook account.  This gave it a sense of being special and you felt like a part of the "in-crowd".  This made it cool, and people wanted to be on it.  Eventually they opened it up more and more.

I can see how the exclusivity factor would help Facebook grow in the very beginning stages, but after enough people have joined, it ceases to be exclusive. Then, most new users join simply because most of the people they know have joined. It's why I joined. And it's also why moms, dads, grandmas, grandpas, and practically everyone else ended up joining Facebook.

MySpace always had a kinda creepy vibe to it, since anyone could sign-up.  This clip from "Super Bad" shows this well (0:38 - contains f-bombs)): http://youtu.be/5lpBlgRNKtY

That's pretty funny But those creeps can still sign up for Facebook, can't they? Maybe they're just not as prominent on Facebook as they were on MySpace since they are a tiny minority compared to all the normal, everyday people on Facebook.

I don't think that [Zuckerberg] even has anything to "sell."  What he has done is erect a toll booth on a road that people will soon figure out is not a road at all, but rather an imaginary path around which there is no real intellectual property protection.

You're probably right about that.

Also, how much more growth in its user base can Facebook realistically expect?  Sooner or later you simply run out of humans with access to a computer.

The monthly growth in the number of active Facebook users has steadily declined from 180% in August 2008 to less than 2% in April of this year. It really looks like their growth is tapering off steadily. They've almost hit a plateau, just like Friendster did back in 2004 when it was overtaken by MySpace, and just like MySpace did back in 2008 when it was overtaken by Facebook.

If Facebook were invented in the '90s...

http://youtu.be/xrYRH3PYYT0

[jackely]

You know anyone who plays Farmville?

Good point. I turn that stuff off so I don't even see it but now that you mention it I do recall getting lots of invites from friends who obviously had nothing better to do with their time.

And yes, I do know someone who spent a lot of time playing the ridiculous game of Farmville. I'm married to her.

[MediumTex]

I think that his "vision" is fundamentally pathological--it consists mostly of finding a simple way for people to waste massive amounts of time. 

I don't get the wasting massive amounts of time part, MT. I check my facebook account about once per day to see if any of my friends posted anything interesting and if I read something interesting that I think they might appreciate, I post it. Actually, I invest about the same amount of time as I do with this forum and I don't see any of my friends doing much different.

I'm just basing that observation on statistics I hear about the average time spent on Facebook per user.

Kids are probably the ones who are pushing up the average.

Facebook can clearly be a good tool when used in moderation and responsibly.  The same is true of morphine.

[MediumTex]

Any thoughts on the controlled demolition we are witnessing of Facebook's stock price and Zuckerberg's mystique?

[Lone Wolf]

Any thoughts on the controlled demolition we are witnessing of Facebook's stock price and Zuckerberg's mystique?

I was unimpressed with Facebook as a company but even I have been surprised at how fast it's fallen.  We're down over 40% in what, 3 months?

On the one hand, Facebook has a critical mass user base.  That is a big prize and I don't underestimate it.  On the other hand, though, they are still a pretty terrible website in sometimes surprising and unnecessary ways.  (Alienating usability behavior, weird bugs, constant changes that nobody likes, etc.)  A lot has been said about their lack of a mobile strategy and that's a real issue, too.

Furthermore, the simple act of installing a basic ad-blocker drops their revenue to nearly zero.  That's an easy process that takes perhaps 30-60 seconds.  It's very scary that their business model desperately depends on this never, ever happening.

If the Suicide Portfolio had restarted the day of the Facebook IPO, would you have bought a big pile for "Arsenic House II"?  :)  Edit: Also, any predictions on where this one's going?  Is this stock going to be visiting the teens?  (21.85 right now.)

[Storm]

I have been playing with social networks since Friendster, MySpace, and now Facebook.  I also use LinkedIn and Twitter.

Personally, I think Facebook is just the latest "fad" in online communication.  In the 80s and early 90s it was BBSs.  In the late 90s it was Internet forums and blogs.  Then, Friendster, MySpace, and now Facebook.  Each one has peaked and then faded when something new came along.  Facebook just seems to be the biggest one yet.

I have no doubt that in 5 years from now, few people will use Facebook and there will be some other type of communications portal that people are flocking to.

What seems to happen is that once a site becomes commercially viable, it gets destroyed by the inherent greed of the corporation.  You saw that with Myspace where they allowed spammers and hackers to take over and turn it into a bling bling ghetto of animated graphics and loud music that made each page look like someone had vomited on the screen while listening to death metal mixed with j-pop.

Now, we are seeing that with Facebook with their evil advertising practices.  Companies are leaving Facebook saying that 80% of their advertising clicks are coming from bots.  Facebook got caught using profile pictures in ads when a wife saw her husband's picture in "meet hot singles in your area," then read the terms of service and realized that by uploading a photo to Facebook, you agree to let them use your profile pictures in ads they show to your friends.  That is just plain creepy, and once profit motive takes over, this is what happens.

I do think, as someone else said, that Facebook initially became popular due to the exclusivity of it - only being available to "the cool kids" at certain Ivy league universities certainly made initial demand for it very high.  Now that exclusivity is gone and it is quickly becoming a ghetto of silly inspirational quotes and pictures of cats.  In short, the signal to noise ratio is going way down and the service is dying.

[Lone Wolf]

Now, we are seeing that with Facebook with their evil advertising practices.  Companies are leaving Facebook saying that 80% of their advertising clicks are coming from bots.

What, you don't believe that users who disable JavaScript are the exact same people that looooove to click on ads?    Read about that yesterday.  Quite a story!

If I were using Facebook in order to advertise, this kind of story would make me extremely nervous.

I am very curious where these bots are coming from.  I doubt that Facebook itself would be stupid enough to do this itself.  Needless to say, if they are personally behind the bots, the company is irretrievably far up Feces Creek.

Facebook got caught using profile pictures in ads when a wife saw her husband's picture in "meet hot singles in your area," then read the terms of service and realized that by uploading a photo to Facebook, you agree to let them use your profile pictures in ads they show to your friends.  That is just plain creepy, and once profit motive takes over, this is what happens.

Really?  Yuck.  I am assuming these pictures are hand-picked in some way?  In my social strata, a majority or near-majority of profile pics are people with their spouse and/or kids.  Not sure how appealing the idea of meeting a "hot single" with a wife and drooling, flailing toddlers is supposed to be!

[dualstow]

I think Andy Borowitz said it best:
http://www.newyorker.com/online/blogs/b ... stock.html

[AdamA]

Any thoughts on the controlled demolition we are witnessing of Facebook's stock price and Zuckerberg's mystique?

It's a confusing situation to me.  People love Facebook.  I don't see it disappearing any time soon, but I have no idea what it's stock should be worth.

Why did they make Facebook a public company to begin with?  What is it that they needed to raise money to do? 

[Lone Wolf]

Why did they make Facebook a public company to begin with?  What is it that they needed to raise money to do? 

My understanding is that this was driven in large part by SEC rules.  Once a company has more than 500 shareholders, I believe that the clock starts ticking on them being required to have an IPO.

Because apart from a rule like this, I agree with you.  With Sarbaynes-Oxley, going public is a pretty unattractive proposition IMO.

[Storm]

Facebook got caught using profile pictures in ads when a wife saw her husband's picture in "meet hot singles in your area," then read the terms of service and realized that by uploading a photo to Facebook, you agree to let them use your profile pictures in ads they show to your friends.  That is just plain creepy, and once profit motive takes over, this is what happens.

Really?  Yuck.  I am assuming these pictures are hand-picked in some way?  In my social strata, a majority or near-majority of profile pics are people with their spouse and/or kids.  Not sure how appealing the idea of meeting a "hot single" with a wife and drooling, flailing toddlers is supposed to be!

https://blog.facebook.com/blog.php?post=110636457130

Notice they don't deny that the ads using profile pics appeared:

The advertisements that started these rumors were not from Facebook but placed within applications by third parties. Those ads violated our policies by misusing profile photos, and we already required the removal of those deceptive ads from third-party applications before this rumor began spreading.

They just deny responsibility by saying a 3rd party app did it.

[smurff]

That's what they all say.

[rhymenocerous]

I think this article gives a good explanation for why Facebook stands out from other social networks like MySpace.

http://www.businesscloud9.com/content/m ... form/11262

Mainly, Facebook is a platform that other developers can use to incorporate social dynamics into their products.  The big upside is that Facebook isn't the one that needs to create these products.  It's a tool that's leveraged by other developers.

[MediumTex]

Facebook stock is now trading under $20 a share.

This is really fascinating to watch.

[Lone Wolf]

Is this stock going to be visiting the teens?  (21.85 right now.)

Facebook stock is now trading under $20 a share.

This is really fascinating to watch.

Amazing!  Apparently the answer to my question from two days ago was "yes".  That didn't take long.

The journey of Zynga's stock price has been even uglier.  From 14.70 to 2.70 since March.  Awful!