What’s behind Facebook’s billions

As the feeding frenzy for Facebook stock follows the company’s inexorable rise it is important not to lose sight of what it means for the internet, David Bowen says.

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What are the comms and online professions to make of Facebook’s $100 billion valuation? Such a huge number is meaningless to most of us, but we (I certainly) can’t help feeling it must have significance that goes well beyond one company and its investors.

In their jobs, communicators need to understand the day-to-day issues of Facebook. They know it’s a good way to engage potential recruits, that some brands have become wildly successful on it. They also know its risks: Nestlé’s encounter with Greenpeace in 2010 was a huge warning to corporates (though of huge cheer to NGOs).

But the longer-term issues are trickier, and it doesn’t help that many middle-aged people just don’t ‘get it’. They see their children addicted to Facebook yet, whenever they take a look, it seems to overflow with illiterate inanity. Which it does. But it’s vital to try to understand why it has become so powerful, to work out whether and how it will affect the way organisations need to handle their communications in a few years’ time.

Why Facebook got so big

It is a nimbly managed company That is why it has outpaced its rivals, just as Amazon outran other online stores and Ebay outshone other auction sites. What they did was to shift and develop constantly. Nimble beats first mover every time.

It is tapping the deep desire of many people – particularly young ones – to communicate constantly My daughter, who is 16, says that if she is not checking on Facebook she feels she is missing out on a piece of her life. Real life, to her. Some of us almost bankrupted our parents with multi-hour phone conversations when we were young. Same addiction, different technology.

But Facebook is much more than that This where the nimbleness comes in. An article in Business Insider this week said: “What people like to do on Facebook is share and view photos of friends and family. Facebook is popular because it is the easiest way to do that over a computer”. Wrong. Some people use Facebook for that. My daughter doesn’t. Nor does my son, who finds it handy for looking up people he’s just met. For others, it’s a replacement for e-mail, a more serious forum or a giant games board. And for most it’s a mix of these and more.

It is creating mechanisms to lock people into its universe Facebook Connect makes it ithe gateway to many online services elsewhere – you need membership to get onto them. Its new Open Graph product means people can read articles or anything imported from the web without leaving Facebook. It is creating an ‘ecosystem’ that means many people will never need to leave it. Or that is the idea….

Why Facebook is not the new internet

So it is not surprising that Facebook is said to want to ‘be the internet’ (though it is careful not to say so itself). There are several reasons it will not succeed.

*However powerful Facebook becomes, it will be not so much like the web, more like America Online or CompuServe – pre-web beasts with a ‘walled garden’ approach that only allowed content and functionality they approved or created. The web grew mighty because it had no walls; if we are all pushed towards the walled-garden model, a sparkling era of free-wheeling fun will be over.

*It is not the only one in the garden-building business. Google is the most obvious rival, but then there is Apple (whose apps are very walled), Microsoft, maybe even Twitter or someone we have yet to hear of. Add the new mobile players (the big growth area) and we could find a patchwork of high-walled gardens, all trying to spread into the others’ territories.

*It’s a profit-driven corporation. The internet grew mighty because it is so cheap to use and exploit. The backbone came from the US Department of Defense (thanks, American taxpayer); the web was invented by Tim Berners-Lee and declared open source (thanks, CERN). When profit-making companies are scrabbling to control it, they will expect to make big money. Twitter has just launched ‘enhanced business pages’ – but only for companies spending $25,000 (£15,800, €18,850) on ads. How different the world would have been had CERN charged for every website.

*Facebook is way off world domination, even in its homeland of social networking. It dominates in the US and much of Europe, but go to India and (Google-owned) Orkut leads; in Russia it’s Vkontakte; and so on. It’s a cliché to say that Americans often forget the rest of the world exists; it would be a mistake if they did that here.

*A less visible problem goes beyond the one of people not ‘getting’ Facebook towards one of active dislike. What most members of this group dislike is the idea of exposing themselves, their thoughts, whatever, to the public or even to their friends. They are naturally private people, of any age, for whom one-way internet is a friend, but two-way internet is anathema. Yet Facebook has also managed to alienate many lovers of the two-way internet. Take Stephen Fry, the British actor and author who recently tried to articulate his loathing of Facebook via another social media platform, Quora: “It really is like an allergy,” he wrote. “I wish I could give you a rational explanation. I am quite prepared to have my loathing dismissed as prejudice and ‘motiveless malignity’, as Coleridge said of Iago. Doubtless it’s all my fault.” So if Facebook does succeed in the domination thing, we will have a new digital divide: between those who do Facebook and those who don’t.

Where all this leaves us

Confused, probably. But it is quite clear that anyone involved in online communications will be working against a background of battling giants. You will have to choose which garden or gardens to plant yourself in. You will find yourself reaching into your budgets for things you used to get for free. You will have to make choices, because budgets are limited.

I am pretty certain that neither Facebook nor any other company will succeed in ‘being the internet’, for which we should be grateful. But much worse than this would be the opposite. What if Facebook’s valuation crumbles, and investors are left crying into their iPads? The dislikers, the sceptics, the parents despairing at their children’s addictions would all say ‘I told you so’. And your bosses may decide the whole thing is a waste of time after all. They did that after the 2000 dotcom bubble burst; they could do it again, even now, and that would be seriously bad news.

First published on 08 February, 2012