Where Facebook Will Fail

Robert Scoble has an interesting (if dated) post called “Why Facebook has never listened and why it definitely won’t start now“.  It’s a good article with many great points.

He writes:

Zuckerberg is a real leader because he doesn’t care what anyone thinks. He’s going to do what he thinks is best for his business. I wish Silicon Valley had more like him.

I get his point.  To run a business effectively, it’s not so important to know what your customer thinks as it is to anticipate what they’re going to think.  And it’s clear that Zuckerberg has a vision and is running with it.

Here’s where I disagree with that vision.

Scoble (and Zuckerberg) have this vision of Facebook as a way to target advertising and make billions. It may well be possible to make billions targeting ads to Facebook users.

There is, however, a mistaken belief that there are high barriers to exit for Facebook users.  The argument goes: when all your friends are on Facebook, you’ll never leave Facebook.

Remember MySpace?

History shows that people will leave Facebook the moment – the instant – something appreciably cooler comes along.  The early adopters will try it, the connectors will promote it, and then the great masses will rush in droves to be a part of it.

It isn’t too technically difficult to create a new social networking site.  Plenty of people are doing it.  None of them are sufficiently better than Facebook to steal the market share.  Yet.

Facebook, however, now has a very, very serious liability: all those pesky ads.  Nothing is less cool in a social networking environment than ads.  I disagree firmly with Scoble on this one.  It’s like I’m having a personal conversation with three of my close friends at a party, and this annoying guy keeps poking his head in.  “Did you say you were buying a car?  You need to test drive the new Mazda 6!  It’s Car and Driver’s Car of the Year!”  Then moments later “You went to the dentist?  Did you know that the Oral B is preferred 3 to 1 by dentists for removing plaque?”

I’m trying to have a conversation here, buddy.  It won’t be long before I punch that asshole in the face.

When Facebook is making billions on ads, someone less interested in buying airplanes, yachts and islands can come along with a new social networking site that has no ads or limited ads.  An alternative that will be instantly cooler.

Once it starts, Facebook will be at a terrible disadvantage.  Once you’re making billions, it’s very, very hard to compete against a competitor who is willing to settle for mere hundreds-of-millions.  Their knee-jerk response will be to increase the ad penetration to keep up the revenue stream.

It will be too late for them when they realize that their revenue model is exactly what is turning off their customers.