“The Facebook” held its initial public offering on May 18, 2012. From day one, the event that had been regarded as a “cultural touchstone” faced some unexpected impediments. The NASDAQ stock exchange experienced an unlikely computer malfunction in the first few minutes following the IPO, causing the system to wrongly place tens of millions of initial trades. Although shares were initially valued at $38 (valuing the company at $104 billion), this figure has since plummeted, leaving shares trading on the day of publication at around $20.
What happened? The doubts that have arisen bear an eerie similarity to founder Mark Zuckerberg’s early concerns about the company. “It’s not about the money!” goes the Social Network adage. Mark Zuckerberg did not start Facebook to make a billion dollars. The site was originally designed to connect people – a mission that it has accomplished admirably. The issue lies in the site’s ability to monetize, and to do so in such a way that maintains users’ privacy and the integrity that Zuck fought to maintain by not going public for so long.
Facebook has reached a tipping point. Its meteoric rise has slowed, and it now faces the dilemma of how to turn a once-addictive dorm room project into the investment goldmine that Morgan Stanley underwrote in May. The social network faces a choice:
The high road: Facebook’s $715 million acquisition of Instagram was imperative. The future of the web and of social media is mobile, and focuses almost exclusively on photo and video. According to the financial advisory website Seeking Alpha, fifty-seven percent of Facebook’s monthly active user base accessed the social network using a mobile device, a figure which is all but guaranteed to surge in the coming months. Facebook’s mobile app, however, leaves a lot to be desired on both iOS and Android, and its content scheme is not particularly conducive to the mobile environment. The mobile app also does not include the all-important “Share” feature, whereby a user can effectively spread content from a source to all of his or her friends in the news feed. Despite increasingly negative feedback for new features (read: Timeline), it seems unlikely that Facebook will abandon its model of constant innovation. Most recently, Facebook has been beta-testing a mobile-only photo-sync feature that creates a personal folder on a user’s Facebook for every picture taken on a linked mobile device. Users can then go into the folder on Facebook and decide which photos to make public. The aim is to push further into mobile and photo, and to eliminate friction between taking pictures on a phone and uploading them. If Facebook can streamline, make more strides into mobile and update its photo and video capacity, it will retain its title as The Social Network.
Another X-factor for Facebook is privacy. Although most of my acquaintances still have an account on the site, a few of my close friends have recently deleted their accounts, claiming to be “off the ‘Book.” This simple statement denouncing allegiance to the world’s largest personal information database rings strangely of “off the grid,” a mantra that evokes freedom and intrigue. Facebook is Big Brother, whether we like it or not, and the amount of privileged information held by the company is mind-boggling. Facebook needs to do a better job of assuring its over 950 million monthly active users that their personal information is safe.
Related to the privacy issue is the Great Firewall. China is the fastest growing mobile market on the planet, and it is currently a de facto battleground for social networks. If Facebook can find a way to maintain the privacy of non-Chinese users and somehow cater to the stringent standards of China’s firewall, its active user base could grow to over 1.5 billion, given the 538 million Chinese who now access the internet.
The low road: If Facebook fails to learn from its advertising miscues and trips off of the tightrope that stretches from personal privacy to well-targeted ads, its growth rate could slow further. Another potential killer could be a repeat of Timeline. If Facebook decided on another forced overhaul with similar size and scope to timeline, the results could be disastrous. The most-likely end to the Facebook era as we know it, however, would be a replacement. How long before another dorm room genius creates a simpler, faster, more mobile, photo- and video-oriented social network that eclipses the ‘Book? Facebook’s strength lies in its size, but how long before another site taps into the initial exclusivity that was The Facebook?
Calls that Facebook is doomed are wildly premature, and mostly geared towards getting a rise out of a public eager to crucify the social media behemoth. Facebook is fine. It will be fine, barring a colossal screw-up or replacement. That being said, it is now time for Facebook to reassert itself if it hopes to maintain a sustainable growth rate. For myself and other fans out there, let’s hope they take the high road. •
