Why Facebook is (almost) doomed

Think about where you played as a kid. It may have been a local park, a suburban street for games of cricket or hockey, a local oval for football, a local pool in summer, a small creek in the country, or in your bedroom hunched over an early gaming console (for me it was the Atari 2600).

Now think about your childhood adventures in the mall or at the movies.

One activity represents an idylic childish innocence and the other a slightly less innocent commercial sphere. To completely bastardise French anthropologist Emile Durkheim one is sacred and the other profane. For Durkheim the sacred is the transcendent and the profane is the everyday.

The contrast between the trascendent and the mundane everyday provides a good metaphor for why I think that Facebook is doomed and social networks do not as yet have a viable business model. Like MySpace before it, Facebook’s spectacular growth will stagnate and it will be overtaken by some exciting new social network.

And it is in the fissure between the sacred and the profane which provides a good example of why Facebook is doomed. Well not actually completely doomed but way over-valued and unable to continue the spectacular growth of the past 5 years.

So why is Facebook doomed?

Originally Facebook was called The Facebook and it provided a new way for college kids to interact, share links, upload photos, express themselves, flirt, vent their spleens, winge, cry and fight.

Being restricted to College students and High School students, Facebook was a non-threatening relatively safe space without the rampent commercialism of MySpace. Plus with the focus on function it looked a hell of a lot better and worked a hell of a lot better than MySpace. As a startup with funding Facebook didn’t have to worry about cluttering their UI with ads.

In 2006, the Facebook people also created a community for application developers called FaceBook Developers who released a myriad of tools to foster the play. Now you could take a quiz that told you which Star Trek character you most resembled.

This play occurred in the equivalent of an idyllic childhood space. Facebook was purely a space for interaction and play. It was the sacred. A place where a bloke from Euroa Primary School found me after 20 years. We didn’t have much to say to each other.

As Facebook got more popular everyone got on board. Kids received friend requests from their parents and workers received friend requests from co-workers they barely knew. Facebook was still a place for play but more a mix of a company BBQ and a music festival sponsored by Scientologists.

With the number of visits skyrocketing in 2007 people started to get very excited about Facebook.  Stumble Upon had been bought by ebay for US$75 million and online valuations appeared to be driven by audience size not revenue or balance sheet. Microsoft purchased a 1.6% share in 2007 for US$240 million theorectically valuing Facebook at US$15 billion. In 2008 Facebook was valued at around US 4 billion.

In 2007 as they hunted for something to do with their massive audience and fulfill shareholders expectations of being bigger than MTV, Facebook stumbled. They forgot about the sacred and shunted into the profane releasing a feature that told my friends when I clicked on a link and bought condoms, laxitives or a present for my girlfriend. Suddenly Facebook was no longer an online space for pure play, rather a tedious food court in a giant mall where my every action was broadcast on a billboard.

Needless to say it bombed. Facebook apologized and continued to rely on text ads and display ads to monetise their audience. Given the audiences focus on play, the ads had a very low ROI. It was a cheap source for traffic but Facebook visitors had a very low conversion rate. If I am stalking my ex-boyfriend I hardly want to click on a get out of debt now link. I’m in stalker mode not save my financial arse mode.

What does work are the Facebook pages. The BurgerKing Whopper Sacrifice campaign was a lot of fun. The thing is that a new page can be setup on Facebook for free. Facebook gets nothing.

Last year Facebook released Facebook Connect which I think is a really useful tool but really only a copy of similar tools from Microsoft and Yahoo. It doesn’t do anything really different.

Facebook recently announced they were going to become the largest market research company in the world. Why not? They have a huge audience of consumers so it does seem a logical way of monetising the poor suckers. I don’t think it will work. I suspect that the analysis provided by FaceBook will not have quite the same authority as the well respected market research companies.

Facebook recently opened their API to allow status updates and queries. This is being seen as a Twitter killer. I am yet to be convinced Facebook just doesn’t have the ‘cool’ that Twitter has.

I suppose it all comes down to the idea that what is sacred must stay sacred and once profaned it is always profaned. Social networks will always have trouble making any significant money because in order to do so they must commercialise the playground and the kids are too savvy to be conned like this.

The problem is that having a huge audience and a great product doesn’t build a great business if you have been giving that product away, Google notwithstanding.

As a user of social networks like Facebook and Twitter I have a vested interest in their success, but as a fan of the transcendental I have deep concerns about their long term future.

What do you think?