Last week, the most prestigious investment bank in the world, Goldman Sachs, decided to invest almost 2 billion dollars in the social network Facebook (a mix of its own and its clients capital), which on paper made the six year old startup worth $50,000,000,000.
Yes, a social networking site is now worth $50 Billion Dollars. With a B.
The recent frenzy around the Goldman Sachs investment as well as the selling of private shares has been a sight to see: everyone wants in on the action. To the casual observer Facebook can do no wrong, they are still growing strong and everyone seems to want in on it.
But, if you’ve ever been a part of an online social network, you might be wondering…what happens when all the cool kids leave and nobody goes there anymore? It has happened with all of them so far, from the online BBSes of the 80s right up to Facebook’s predecessor MySpace, which while still having millions of users is doing poorly financially and has lost its cool edge.
Douglas Rushkoff, who has witnessed and chronicled the rise of the Web as well as anybody, thinks that the recent investment is actually a signal that Facebook has reached its zenith, and will soon join the ranks of all the other “been there, done that” social networks. In Facebook Hype will Fade, he lays out his argument:
"Appearances can be deceiving. In fact, as I read the situation, we are witnessing the beginning of the end of Facebook. These aren’t the symptoms of a company that is winning, but one that is cashing out.
The object of the game, for any one of these ultimately temporary social networks, is to create the illusion that it is different, permanent, invincible and too big to fail. And to be sure, Facebook has gone about as far as any of them has at creating that illusion.
If you were there for Compuserve, AOL, Tripod, Friendster, Orkut, MySpace or LinkedIn, you might have believed the same thing about any one of those social networks. Remember when those CD Roms from AOL came in the mail almost every day? The company was considered ubiquitous, invincible. Former AOL CEO Steve Case was no less a genius than Mark Zuckerberg.
Yet social media is itself as temporary as any social gathering, nightclub or party. It’s the people that matter, not the venue. So when the trend leaders of one social niche or another decide the place everyone is socializing has lost its luster or, more important, its exclusivity, they move on to the next one, taking their followers with them. (Facebook’s successor will no doubt provide an easy “migration utility” through which you can bring all your so-called friends with you, if you even want to.)
So it’s not that MySpace lost and Facebook won. It’s that MySpace won first, and Facebook won next. They’ll go down in the same order.”
Rushkoff’s argument is that Facebook is merely the latest in a long line of social networks that have risen and fallen…he sees no reason why Facebook (albeit the biggest ever) is no different.
In the long term I definitely agree with Rushkoff…Facebook has a lifecycle just like everything else. But short-term we can identify several factors that will influence how fast Facebook loses its mojo:
Social Graph Export
Once we have our friends identified and connected with, a service becomes more valuable because we don’t have to go anywhere to find them. Facebook is betting that by owning the social graph (and making it difficult to export) they will have you locked into the service long-term. So far this seems to be the case, but if other social networks can use the current export tools to recreate the social graph and add valuable data on top of it, then they could start stealing user’s attention away from the service.
The Loss of Exclusivity
But there also comes a point when we’ve connected with so many people in one spot that that spot loses its exclusivity…it’s not special to be there anymore. This is the point that Rushkoff is making…equating social networks with social hotspots like gyms or clubs, whose popularity ebbs and flows with some sort of cool factor. This is a natural change that will inevitably occur…it already feels like Facebook is not cool anymore.
The Value of Niche Networks
For some time now we’ve seen other, niche social networks grow slowly into real communities. Sites like Ravelry, PatientsLikeMe, Dribbble, and others focus on supporting a specific activity and by doing so serve their audiences better than an all-encompassing social network like Facebook can. As more and more niche networks mature, they’ll increasingly steal attention away from Facebook.
A Return to Identity
Design-wise, it’s well known that Facebook is the yang to MySpace’s yin. Where MySpace let users customize their page in any way they wanted, Facebook has very little customization options at all. We’re seeing the rise of personal identity sites like flavors.me and about.me fill that gap…it will be interesting to see what sort of adoption those identity sites get going forward. So far they’re growing quickly.
In the meantime, Facebook is the current social network juggernaut now worth 50 billion dollars and they seem to have all the momentum in the world. The question is…is Facebook bound by the same laws of physics as everyone else?