04 June 2012

What Facebook Must Face

No app for strategy, nor a strategy for the app

It’s become fashionable to bash Facebook in the wake of their sub-par IPO. This post will not pile on, but point out some realities. I have no inside knowledge. This is strictly my view; take it for what it’s worth.

Social media isn’t immune to rapid business cycles. Internet companies come and go at supersonic speeds. We take it for granted that Yahoo isn’t what it used to be, but forget that it also emerged quickly. We know Rupert Murdoch bet wrong on MySpace, but forget that it was an overnight success story at the time. Today on CNBC, Ironfire’s Eric Jackson opined that “In five to eight years (Facebook is) going to disappear in the way that Yahoo has disappeared.” Personally I’ve been telling friends that Facebook and Twitter could become like Yahoo in five years, but what do I know? The point is that it’s absolutely possible. The Greeks had the agora, American pioneers had the general store, Mad Men had the water cooler. All of those social media lasted decades or even centuries; the cycle is much faster now.

You still need to have a strategy. The business world debates the relative merits of Strategy, Execution and Culture in an organization’s success. (Spoiler alert: All three are important.) In a world of rapid business cycles, maybe strategy sounds slow. You still need one, however, and I’m not sure what Facebook’s strategy is. Last year when I spoke at a social media conference, many attendees who had just been to F8 wondered the same thing. There’s a sense that Facebook makes it up as they go along. It’s evident in their scattershot approach to mobile, and of course from the IPO. Where do they want to go? How do they see themselves evolving as technology and consumer behavior influence one another? Strategy should answer those questions.

Complacency is subtle. I don’t think Facebook is arrogant, as some claim. Arrogance would say, “I have 900 million users; who cares what people think?” Complacency merely takes those users for granted. I confess I’d feel complacent if I had 900 million users: Most of those users won’t just get up and leave, abandoning all the personal photos and memories they’ve stored in their accounts. That still leaves the question of money. What happens if Facebook becomes harder to monetize? Advertisers are still learning how to interact with those 900 million users, and hopefully they will succeed.

Hopefully, Facebook will succeed. We shouldn’t wish failure on anyone. It will come, though, if we don’t face the cold, hard realities of modern business. Zuckerberg is now responsible to users and shareholders. He needs a plan.