The Facebook Overreach

I actually started writing this a few weeks back, when news first broke of Facebook branching out from an exclusive membership model, presumably to take on that Wild West of social networks, MySpace. But given the news that this move is a reality, today, thought I would throw my commentary into the mass that is no doubt being written.

This is a Bad Idea. A classic example of inappropriately twisting a business model to justify investor demands and market expectations.

As I have said before, I love the original Facebook business model. It takes a reasonably cool set of social networking features and a clean UI, and marries it with a hyper-social, hyper-active, local, offline set of communities, i.e. college students clustered on their real-world campuses.

It’s this idea that set Facebook apart from MySpace, Friendster, and the legion of wannabes (obviously MySpace has been successful, but for reasons of their own). Online social networking tools, no matter how powerful, cool, or just plain pretty, still tend to produce communities of a purely virtual nature, lacking that personal, face-to-face, offline connection that turns a neat club into an indispensable part of your life. Facebook’s smart idea was to layer online social networking tools on top of the existing, strong and social community that thrives in college dorms, Greek houses, clubs, school sports, the campus party scene, and so on.

For that community, Facebook didn’t force them to separate their social interaction between online and offline - it married the two in a nearly seamless manner.

The site became a way of life for US college students, and even faculty, with use and stickiness numbers that would make most Web-based businesses drool.

Facebook nailed the campus social networking experience and achieved fantastic audience penetration, and needed to take the next step.

That next step should have been development of their monetization strategy (deeply targeted advertising for US college students). Focusing on revenue and profit, while continuing to enhance the user experience of their core market.

They had work to do there - I know of folks who have run ads on the site, and they have been frustrated by the massive potential apparent, and the inability of Facebook to tap into it effectively. The advertising capabilities of the site have not matured to take advantage of the value it could provide.

Instead of focusing on their market and developing their revenue, they bowed to pressure to grow their user base, in a misguided attempt to compete with MySpace. This evolution began when they extended into corporate employee communities: a flawed idea - Facebook is about letting it all hang out, and large company employees can’t afford that with their peers. Plus, they never tweaked the feature set to support this - it has always felt like the college student networking tools were grafted onto a corporate audience; when I use the site from my corporate account, I feel like an interloper in an experience not meant for me.

And now the quest for user base growth completes it evolution, as Facebook opens up the site to anyone and everyone in order to go head to head with MySpace in a raw user numbers game reminiscent of Bubble 1.0.

What’s the risk?

The risk is the Facebook crew is taking their eye of the ball - they have a dominant position among the most desirable target demo for advertisers in the US, and instead of focusing on deepening that position and monetizing it (profit!), they are in a footrace for more users. Facebook owns a space where MySpace doesn’t effectively play, because they deliver on a marriage of online with offline community that MySpace simply can’t match.

By morphing themselves into a generic MySpace competitor, they are playing MySpace’s game rather than focusing on what they do best and leveraging what sets them apart from every other social networking site out there.

I’ve always been a huge fan of Facebook, but I think in this case their misguided focus on competing with MySpace in the user numbers game could lead to their downfall. I can only assume this is done in order to make the site a more attractive acquisition target and get the payoff for investors and founders, but I would hope a smart acquirer would see where the real value in Facebook lies, and re-focus the site on what it does best.

tags: facebook, myspace