OK, Facebook, I give up. I've been trying since 2006 to like you, but it just ain't gonna work between us. And, to be honest, your new friends on Wall Street might want to know why.
FB ads aren't so shiny after all
The money to keep Facebook running comes from ads. If that cash flow dries up, Facebook will be forced to find more... aggressive ways to monetize its users.
General Motors famously dropped its Facebook ad campaigns earlier in 2012, concluding after exhaustive marketing studies that the ads had no appreciable effect on customers' buying habits.
In related news, you've probably heard about the little scuffle between Facebook and digital music company Limited Run. Having paid Facebook a considerable chunk of cash for targeted ads, Limited Run got suspicious about the traffic that was coming their way as a result. Like any good geek-run firm would do, they decided to program and run their own independent analytics. It turned out that 80% of the traffic they had paid Facebook for was just bots. Whose bots? That's not yet known. Or look at UK-based Virtual Bagel, a covert ad-buying experiment that found all sorts of strange patterns- none of them potentially profitable- in its Facebook "likes".
Just for kicks, I tried browsing Facebook this morning with Adblock disabled. It tried to sell me a parka, a bottle of mystery skin care cream, a chlamydia test, a bow thruster, a bodybuilding workout video and a Lusitano stallion. Only one of those is remotely relevant to anything Facebook knows or ought to know about me. Considering how much personal data they can draw on for this purpose, Facebook's ad targeting looks an awful lot like Dick Cheney's quail hunting.
If I were thinking of pouring metric boatloads of cash into a marketing campaign, I would expect a better-than-random chance of hitting users who might actually be interested in buying my product.When I look at my own data-laden profile and find that they have no flippin' clue what to sell me, I'm not exactly inspired to pay them to round up clients.
Pay-to-play is driving content creators away
My friend John Harries did a little experiment recently. When the "promoted posts" feature came out, John found that his click-throughs from Facebook dropped by a factor of ten. Paying the \$5 to "promote" one post brought the click-through rate right back to where it had been, and when that promotion expired, the factor-of-ten drop returned. Fans who had "liked" his page simply weren't getting any of the material posted to it.
John's not the only one to notice this effect. When pay-to-play came out, only 16% of Facebook users showed any interest in it, and only 1.2% would consider paying for it at the \$5 ask.
The rise of the junkweb
The original promise of the Web was that everything would link everywhere- you could keep clicking and clicking, learning something new with each page you passed, until you were on a completely different topic. There's even a "sport" built up around one site's subset of this idea: Wikiracing.
Not so on Facebook, and on the various smaller sites that try to ride its coattails. A snarky caption overlaid on a cheesy photo is now an end in itself- it doesn't do anything, it doesn't go anywhere, and you don't learn anything from it. Its only purpose is to circulate, to be shared across the social networks, and to be forgotten a few minutes later. Chris Brogan coined the term "junkweb" to describe the phenomenon, and he's rather more optimistic about it than I am.
When genuinely interesting articles do appear on the "junkweb", they rarely appear as simple links. Rather, you see "so-and-so shared this article" with a link to install some third party's proprietary news reader app, giving it full access to your Facebook profile in the process. Don't want the sketchy app? Then you don't get to read the article.
What do the rules mean today?
With the site's policies and rules changing daily, it's difficult- if not impossible- to figure out the rules at any given time. Facebook's censorship team, famously, has so far been unable to distinguish between making amateur porn and feeding a baby. Some folks I know have complained of accounts being taken down because an image that was within the rules when it was posted has been flagged as unacceptable under some later iteration of the rules. Privacy policies and settings vary from week to week and it's never clear which ones apply to your account unless you check up on them all the time.
I've never come anywhere close to the boundaries of Facebook's rules, but some friends have. They're a moving target and keeping up with the constant changes takes time.
Where did everything go?
Back in '06, the hub of Facebook was the Wall. If something was on your Wall, it was because a friend thought you'd be interested in it. The dynamic was very much friend-focused. Very social. It was essentially an online version of the office water cooler. My Wall was sparse, but everything on there was genuinely interesting and indicated that someone, somewhere, knew I'd like to see it.
Then came the News Feed. It lumped everything, from everone you knew, into one big stream of posts- and it pushed everything you wrote to everyone you knew. People quickly realized they didn't necessarily want to share everything with everyone. A few of us stayed away for a while as Facebook built additional controls into its system so that you could have at least some semblance of control over who saw what. Eventually, though, the bugs were worked out and it became widely accepted- most folks were just a little more cautious about what they wrote and who they shared it with.
Facebook never stays still, though- it releases a new version almost every day, and never rolls back a change. Among the recent additions has been a suite of algorithms to filter your feed, supposedly to ensure that what shows up on your front page is what you're really interested in.
The net result of that filtering, for me, is that my Facebook home page only shows posts from 10 or so of my 200+ acquaintances (I shall reserve the term "friend" for people I see and/or communicate with on a somewhat regular basis). One-third of it is about my wife's (admittedly very cute) dogs, another one-third is junk links ("so-and-so checked in at \$airport_coffee_shop", you should too!) and, on a rare occasion, what's left will include something interesting from a lab mate or travelling friend.
So there are something like 190 people I supposedly know, but never hear about on FB- not because they aren't on it, but because the ranking algorithms decided that I didn't comment on their posts often enough and that I must therefore not care about them. The majority of what does show up is either stuff I've already seen, or stuff that doesn't matter- a signal to noise ratio so low that it's not worth the effort to sort through it.
But surely it can survive that!
I'm increasingly convinced that Facebook survives based on critical mass, rather than on appeal, competence, utility or innovation.
Google Plus was technically superior in almost every way, except that very few people were willing to migrate until all their friends did. (It probably didn't help that, as far as personal data is concerned, Google is often perceived as evil and cunning, while Facebook is perceived as evil and incompetent. Google's ads are almost creepily accurate at times.) All it'll take is one good competitor to hit critical mass in a few crucial demographics.
Hitting the stock market may have meant a nice payout for Facebook's early investors, but things aren't looking so rosy in the post-IPO hangover. At \$38 a share- a P/E of about 60- it was clearly overpriced. At \$21 a share? Still overpriced, at P/E=32, for a company that's already as big as it can get in a field where corporate lifespans are usually measured in single-digit years. The transition to mobile devices is hurting them hard; FB has not yet figured out how to push ads to smartphones in a way that won't start a user rebellion.
I haven't gone into the privacy, data security, regulatory and other issues that are grating on Facebook right now, because for the present purposes, they don't really matter. The company's already demonstrated that it can screw up over and over, and its users will stick around because the core of the service was still worth it. Now, though, the core of the service- the social sharing of information, ideas, events and opinions- is rapidly collapsing under the weight of botched ad campains and clueless ranking algorithms.
No, I'm not leaving Facebook for good
Facebook is still a very useful way to track down friends who have moved, changed phone numbers, or otherwise become hard to find. I'll still use it for that. The actual communication, though, will be through email, over the telephone, or in person. Facebook itself just isn't worth the trouble anymore.