A Disgruntled Nod to Facebook

The notion of social or social network did not begin with Facebook. It in fact existed for a while, with the likes of Myspace, Friendster or Cyworld, a once sensational destination for Koreans. I believe that the difference was eventually in the sheer number of members that started an irreversible and impenetrable network effect as well as the emergence of the notion that many eyeballs or members (say more than a billion people!) were enough to create a sustainable business on the basis of advertisement serving model. I also believe that Facebook has intentionally or accidentally employed a brilliant marketing and expansion campaign that made prospective members want to join due to the initial aura of exclusivity. As one might have guessed, I am not a fan of Facebook. Such emotions notwithstanding, I am a member of Facebook, have been since the first year of its emergence, and log in at least once a day.

Most of the school activities and updates revolve around social network and in the fear of missing out and in my effort to remain “social”, I stay on the network, which represents perfectly the power of its network effect. When everyone else is on it, you cannot afford to ignore it. I do acknowledge its benefits – easier communication with various friends and maintenance of friendship in the era of internet and mobile. The downside, at least for me, is the lack of privacy and intimacy (call me analog) as well as the uncontrollable desire to window dress yourself online and compare oneself with hundreds of updates from friends a day. The power of network, however, is a difficult one to resist. Based on such premise, Facebook has emerged as a winner, boasting close to a billion users and the private and public market assigned a rich valuation to social network giant assuming that it will produce extraordinary revenue based on its user base.

Although it has failed to reach its commerce potential of Facebook (known as f-commerce) by some account, Facebook has produced respectable revenue based on its advertisement serving, and noticing such developments, other internet giants such as Google jumped in the business of social with Google +, hoping to chip away at Facebook’s existing user base. It has garnered a moderate success in my view with some hundreds of millions user base, however, the majority views Google + as a weak competitor to Facebook. So where does the future of Social lie? There are many companies working on the contingent land of social, such as social gaming (e.g., Zynga), social discovery, Social-Local-Mobile, as well as a more professional version of social (e.g., Linked In). Many of these services are built on top of Facebook and this Facebook’s ecosystem will make Facebook a more difficult company to beat for Google + or any future competition. I believe due to such strong network effect, Facebook’s domination will continue to hold up in the social industry for the next 2-3 years.

In terms of f-commerce, I believe that the efficacy of various ads, whether mobile or web-based will be in question by the advertisers/brands as the reason for people going on the social network tends to be different from going to Google to search for something. People going on the network to check their friend’s new relationship status is less interested in clicking on an ad than someone who is searching for “best socks for men” on Google. Facebook or any other social networks will have to search hard for viable and attractive revenue streams (and Facebook is doing exactly such searching – almost on a daily basis) and at the end, it is difficult to predict whether Facebook will continue to grow at a breakneck pace in 2-3 years, due to Facebook fatigue and its coolness status as the presence of advertisers and brands becomes stronger on Facebook.

It is suffice to say that Facebook, despite its strengths and weaknesses, has certainly changed how the world communicates and connects and its influence will be felt through a decade to come. And although there is a possibility of its valuation level being reduced to correct for grand expectations and users looking for the next cool thing, thanks to its gigantic and active user base, the network effect it creates, and multitudes of platforms built on top of it, Facebook will most likely remain as the victor of the battle for social for some years to come.