SoLoMo Series: Facebook

by Steven Miller June 7, 2016

June 7, 2016

 

Welcome back to the SoLoMo series, where we’ll be running through the latest in social, local, and mobile search. By taking a deeper look at each of the industry titans, we’ll decipher what 2015 brought, what 2016 may bring, and whether the same players will even be around in 2017 at all.

Last time around, we dove into the fascinating structure that is Alphabet. Or, as I like to think of it, the new name Google came up with after playing a bit too much Resident Evil. This post will focus on its equally intriguing Silicon Valley neighbor. I’m talking about the platform whose origin story became an Aaron Sorkin movie. That one who spawned a sociopathic type of behavior, which, naturally, became a MTV show. It’s the big blue square that is currently worth the combined GDP of Hungary and Romania.

That’s right – let’s talk about Facebook!

As a business, Facebook is absolutely fascinating. Someday, I’d like to write a book about how this brilliant MySpace wannabe navigated the Internet age of the early 2000’s, captured the hearts of billions, restructured how we view social dynamics, and then died. Oh, how it died. Over, and over, and over again.

2015 in Review – We’re not dead, yet…

Every few months now, someone takes to trumpeting the end of times for Facebook. It’s remarkable – almost as if there’s a sign-up list in media circles to write these premeditated obituaries. Just look at this nonsense:

Pretty morbid, right?

Full disclosure: The May 2012 Facebook IPO was a personal holiday. As a recently minted Finance student at the time, I thought it was a historically cool moment (further disclosure: Yes, I’m well aware how lame that sounds).

I mention this because that IPO marks a critical moment in Facebook’s lifespan. By becoming a public company, we now had a glimpse behind the curtain of how exactly Facebook operated. The financial community had a hell of a field day – there was now enough data to assign some form of value to the ephemeral social platform. Unfortunately, nobody really knew what to do with it all.

The general approach was to grade Facebook by the size of the user base. If an earnings call came around and there were more users than before, everything was gravy. If the alternative happened and that growth stagnated…well, the pitchforks started coming out. As Twitter, Snapchat, and others rose to prominence, that seemed to happen more often than not. I tend to subscribe to the theory that an active Snapchatter does not make for an inactive Facebooker (there’s a form of mutual exclusivity), but I digress. We’ll save that conversation for another day.

Aside from the somewhat misguided approach of assigning value by usage, there seem to be a few other key themes that people tend to cling to:

  • Outrage over a product change (ex. Tweaking the News Feed algorithm? Blasphemy!)
  • Popular new competitor (ex. Ello, as covered by yours truly)
  • Peculiar acquisition (ex. Instagram, WhatsApp, Oculus, who knows what’s next)

Whenever I come across the fire and brimstone proselytizing on any of these, I’ll fondly think back to a Newsweek article from 1995:

“Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.

Baloney. Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”

This is Dr. Clifford Stoll, sharing his thoughts on the Internet. Baloney! I love this article. It seriously warms my heart. There’s a deep appreciation I have for someone who brazenly makes a prediction, and 20 years later, couldn’t be more wildly wrong. The people who proclaim the downfall of Facebook are the closest thing we have to modern-day Cliffies.

Sometimes I’ll think back to Cliffy and wonder what the last few decades were like for him. Did he frustratingly watch the rise of e-Commerce through the ‘90s, and loudly cheer for the Dot Com crash? Did he double down afterward and dismiss smartphones as nothing more than expensive novelties? At what point did he realize the error of his ways and accept that maybe, just maybe, this thing known as the Internet is here to stay?

I’d prefer to think he found a satisfying hobby, like glass blowing. There’s quite the community online for people who are in to that sort of thing.

Social – So, uh, what now?

I guess the point I’m trying to make is that Facebook is here to stay. It’s embedded in our lives one way or another. After all, one out of seven people on this planet are using it daily. To put that in perspective, the same number of people practice Islam. That’s right – we’ve reached the point where Facebook is now comparable to the world’s second largest religion. Welcome to 2016.

Facebook has hit a critical mass. The people who aren’t using Facebook are the people who don’t have access to Facebook. When you’re Mark Zuckerberg, how do you expand the user base at this scale? It’s simple, but certainly not easy: Get the remainder of the world on the Internet.

Zuck probably wouldn’t agree outright, but looking at the past few years, it seems like he’s modeling himself after two iconic predecessors: Bill Gates and Steve Jobs. The former has strived to generally improve the quality of life across the world, while the latter dedicated his life to advancing societal access to better technology. Interestingly, with the same level of near-unlimited resources, Zuck has attempted to do both.

On one hand, we have Bill Gates: Humanitarian extraordinaire. As the most funded private foundation ever, the Bill & Melinda Gates Foundation has established the norm of tech executives leaving behind a charitable legacy. However, unlike Jobs’s more technologically practical contributions to society, the wizard that brought us Windows has taken a much broader scope: Poverty, Agriculture, Sanitation, etc. You know, the simple stuff.

Zuck’s humanitarian approach here is noble. He’s aiming to give Internet access via solar-powered drones to communities that otherwise wouldn’t be able to do so:

“Aquila will be responsible for beaming Internet signals back to rural areas on Earth that lack the kind of communications infrastructure needed to maintain Internet connectivity. According to [VP of Infrastructure Engineering] Parikh, 10% of the world’s population live in these rural areas—found in certain regions in Africa and India, among others—and are unable to access the web.”

This is great and all, but I don’t really buy that it’s entirely because of Zuck’s bleeding heart. As mentioned before, Facebook has pretty much reached everyone it possibly can. The only way the user base grows is by getting more people access, and I’d wager that the sponsored connectivity beamed down is going to come with a few strings. Much like how one has to navigate an ad or two when logging on to Wi-Fi at Starbucks. A required login via Facebook could technically be construed as a “new user” (whether he or she actually uses the platform or not). Call me a skeptic, but given the proclivity to value Facebook based on its user base, this seems like a method to promise more warm and fuzzy earnings calls.

On the other hand, we have Steve Jobs, the greatest product innovator of his generation. There are plenty of examples where he saw the future long before others, but three specifics come to mind:

1.) The Apple II, debuted in 1977 by then-22-year-old Jobs, ushered in the dawn of personal computing. Even back then with it’s steep price tag of $ 1,300 (over $ 5,000 nowadays!!), it was so well received that it almost single-handedly kept Apple relevant for the next decade and beyond. As put by Time magazine:

“Of course, the Apple II readied the world for the Mac, the iPod, the iPhone, the iPad and, come to think of it, every other major technology gadget of the past 35 years. More than any single other computing device, it’s the one that crawled out of the primordial ooze and scampered assertively in the right direction. Countless others followed its lead, and continue to do so.”

2.) Pixar, where Jobs found refuge after his ouster from Apple, single-handedly brought feature animation to the world with Toy Story. Since then, the animation studio has won 14 Oscars. Talk about a successful side project.

3.) The iPhone, which I don’t even think warrants explanation at this point. We all have ‘em. Good luck getting more than 2 years out of one.

There’s a particular technology Zuck has taken upon himself to push forward with the same zeal as Jobs would have had. Hold this thought for just a moment; we’ll be coming back to it shortly.

Local – Goodnight, Sweet Yelp

Facebook has comically stumbled over itself when it comes to local search, both for users and businesses. On the user side, the Places check-in feed that debuted in 2008 did not go particularly well. Originally intended for people to see friends within three city blocks from them, it was scrapped in 2011 due to the hilariously blatant privacy issues. I like my friends, but I’m not sure I’m comfortable enabling them to track my every move. Thanks for the option though, FB!

The local approach toward businesses has also been awkward and clumsy. Facebook Locations, previously known as “Parent-Child”, was modeled to give individual locations the ability to govern their own pages (the “child”) while still remaining tied to a larger brand (the “parent”). I always figured that this structure was an attempt to give franchisees a sense of social autonomy. And it seemed like a good idea! From a strict SEO standpoint, having the physical address of a location on a site of Facebook’s size is a very good thing. The only problem is that this model only really benefits large corporate entities who want to think they’re a part of the “community” their store happens to be in.

Given that, this has been executed a few times to varied levels of success. It’s always been with either significant personnel or monetary implications. The most interesting ones who have gotten it right would be:

  • Dominos – Individual stores are able to offer specific offers on their pages, such as discounts for local sports team victories. This is fun in the provincial sense, I guess.
  • Starbucks – Each location’s page is used as an extension of the bulletin board right above where you grab your cream and sugar. It requires a highly motivated and enterprising store manager.
  • Citigroup – Strictly for SEO purposes, with nothing more than business information included on each page. All engagement components are disabled. For what its worth, I like this approach. I don’t need cheeky updates from a bank; just tell me if you’re open on Saturdays.

Those are the outliers, though. By and large, corporate communications departments don’t think in terms of site authority. The idea of a rogue store manager going off the rails and damaging a parent brand gives PR people nightmares, so any social-local autonomy has essentially been ignored.

Let’s look on a smaller level to December 2015, when Search Engine Land reported a quietly debuted platform that sure looks a lot like Yelp. It was introduced as a beta test at Facebook.com/services, where you’re free to browse through roughly 100 different types of categories ranging from dentists to DJ’s across major cities.

Facebook Services - SoLoMo Series: Facebook

Facebook owns the most comprehensive social database on earth, and appears to be testing how it can leverage all that personal data we’ve willingly given up against the same location-specific rules that Google recognizes. Even though it’s still in beta testing, the implications are massive if the platform is truly built out. If I were Yelp, this would be a bit troubling. You never want to see a competitor 170 times larger start emulating you.

Mobile – Playing with house money

Based on everything covered so far, it should be clear Facebook is doing alright. After all, they just put up a record quarter. Per Bloomberg:

“The company now has 1.59 billion users who log into the service every month, especially on smartphones and tablets. That expansion in turn generates more profit, giving Mark Zuckerberg leeway to invest in the company’s future. On a call with investors Wednesday, the chief executive officer spent most of his time talking about virtual reality, artificial intelligence and connecting the rest of the world to the Internet. While those initiatives won’t contribute meaningfully for years, they’re aimed at making sure that more people put Facebook at the center of their digital lives.”

Kind of seems like a lot to tackle at once, doesn’t it? The same article goes on to say:

“For Facebook, the profit from ad sales enables investments in ambitious projects, which are starting to show early signs of progress. Oculus Rift, the virtual reality headset, started its first sales to consumers earlier this month, and the company said there are more than 100 games and experiences coming to the platform later this year. Internet.org, the free Web access initiative for emerging markets, has a Free Basics app now used by 19 million people, and it’s big enough to have sparked protests in India for being too Facebook-centric.”

There’s a lot to unpack here. Two years after Facebook’s initial foray into virtual reality, one could argue it’s either been a smashing success or an abject failure. This is the Internet, after all – of course there must be two starkly opposed opinions.

I’ll start with the negative take: When Facebook announced its acquisition of Oculus for $ 2 billion back in 2014, the Kickstarter community who originally backed the project, to put it lightly, completely lost its shit. They had legitimate concerns. Oculus had gone to Kickstarter requesting $ 250,000 to develop its initial prototype headset, the Rift. People went full-on Fry from Futurama and threw $ 2.5 million at it. There were 10,000 very eager and enthusiastic backers watching this now.

The outrage would be totally valid if not for what’s happened these past two years. Sure, Oculus didn’t ship anything, but it’s not like Facebook bought the technology for themselves and sat on it. Significant resources have been dedicated toward advancement, from establishing an entire “Social VR” team to partnering with Samsung on a “Social Alpha” group chat tool for Rift’s partner device, the less-pricy Gear.

It’s difficult to pin down an exact number that’s been invested by Facebook beyond the initial $ 2 billion, but I wouldn’t be shocked if it’s a multiple of 2014’s price tag. That’s respectable when you consider how Google, already a product innovator in its own light, is writing checks for less than half that. Facebook has well established itself as the leader in pushing VR forward.

And c’mon, Kickstarter folk, there’s no point in complaining now. Your Rifts are finally in the mail! Wait – what was that? It’s already available for the greater public at Best Buy!? I apologize, please carry on with your rage.

So, here we have a $ 350 billion corporation that’s at the forefront of both virtual reality and providing worldwide Internet access. They grow up so fast, don’t they? I’m confident Facebook is entirely capable of pulling these highly ambitious goals off – eventually – the momentum is certainly there.

Let’s just hope it keeps everyone’s trust long enough to get there.

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