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Is Facebook really the new Yahoo?

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At this point, Facebook is clearly the undisputed 600-pound gorilla of the social-networking world, having vanquished Myspace and virtually all other competitors, with more than 600 million users and billions of dollars in revenue, and the ubiquitous “like” button installed on hundreds of millions of websites. But other web giants have toppled before, or are in the process of toppling — like Yahoo, for example, which seems to be drifting aimlessly, waiting to be broken up. In a blog post at Datamation, writer Mike Elgan argues that Facebook is the new Yahoo (s yhoo): a fading giant reduced to copying other networks like Twitter and Google+ (s goog) instead of innovating. Is he right?

In a nutshell, Elgan argues that Facebook didn’t really come up with anything all that new or interesting that would justify its massive growth and current position at the top of the social-networking food chain. All it really did, he says, is come along at the right time:  a time when the combination of technology and social behavior online was primed for the introduction of a social network that anyone could use. By starting with universities, it slowly built critical mass until it effectively became the default social network for an emerging generation. Says Elgan:

At just the moment when the world was ready for everybody using social networks, Facebook let everybody in… Facebook’s “idea” isn’t particularly interesting. Its design isn’t revolutionary. The company’s engineering isn’t especially impressive. But Facebook’s timing has been perfect.

Elgan goes on to say that Facebook’s time has come and gone — that so much of the web has become social that a single all-encompassing network is no longer necessary.

Facebook knows what its members apparently do not, which is that today’s Facebook won’t allow the service to survive on the social Internet of tomorrow. Facebook used to be special. But now social is everywhere. Facebook finds itself trying to sell snow to Eskimos.

Too big to innovate, but big enough to fail?

As a result, Elgan argues that Facebook is trying desperately to launch new things and more or less failing with most of them. As examples, he gives the social network’s location-based Places and group-buying Deals offerings — both of which have been shut down, or at least drastically reduced in scope — and the launch of Facebook mail and the all-in-one inbox, which he says no one really uses. In addition, the network has been reduced to just copying Google+ by adding new list features and the new “subscribe” option, he says.

So is this all just “flame-bait,” as a commenter on Hacker News described it? In part, perhaps. Elgan’s piece goes overboard in some directions: for example, Facebook’s programming is fairly complex, and some of the failed offerings he mentions are arguably a sign of a company trying to remain innovative. At least Facebook moves a lot faster than some other web behemoths — including Yahoo and AOL (s aol) — when it comes to killing off or reinventing its failures.

When it comes to the copycat aspect of Elgan’s argument, there’s some truth to that charge. As Farhad Manjoo points out at Slate, there’s a consistent theme running through Facebook’s history that involves being a “fast follower” — in other words, not inventing a new concept, but introducing a better version of something that has been around for a while (just as Facebook itself followed Friendster and other networks). That’s not necessarily a bad thing. Making it easier for people to filter their friends is probably a good idea, although I’m less sure about the benefits of letting people subscribe to posts, since that is a pretty major departure from the “symmetrical” friends-only approach the network was built on.

Facebook has lots of users, but how much are they worth?

So does the comparison to Yahoo have any truth to it? Yahoo is also a gigantic web company, with hundreds of millions of regular users — it’s consistently number two in most web traffic rankings — and has a huge advertising business based on all those eyeballs, just as Facebook does (although Yahoo creates content, and Facebook doesn’t). And that ad-based focus is the biggest risk for the social network when it comes to avoiding Yahoo’s fate: Facebook has shown it can aggregate users, but it still has to prove its ads are better than the regular kind Yahoo and AOL have been flogging for a decade or so.

In the end, Facebook’s biggest challenge is just its sheer size. With over 2,000 employees and 700 million users, it’s a lot closer to being Yahoo or Google than it is to the plucky startup whose CEO wears flip-flops and has a business card that says “I’m CEO, b****.” At that size, it isn’t enough that a new offering like Places or Deals is cool or even useful — it has to immediately appeal to hundreds of millions of users, and produce a billion or so in ad revenue, or it’s just not worth doing. That’s why Google has been paring back the things it offers that aren’t working.

One thing Elgan points out might worry Facebook even more: the idea that being a large social network where people can see who has a birthday — or share photos of their graduation, or play games with virtual farm animals, or pretend to be a Mafia don — just isn’t that interesting any more. The real nightmare might not be that Facebook becomes the new Yahoo, but that it becomes the new Microsoft (s msft): huge and profitable, but also boring.

Post and thumbnail photos courtesy of Flickr user Stephen Brace

34 Responses to “Is Facebook really the new Yahoo?”

  1. So I agree with the majority of your arguments. But I think that fast follower is smart. Case in point Apple. Apple did not develop the idea of the tablet or the smartphone. But it was smart enough to see an oppurtunity, and design an interface that appealed to millions. I would say that in many ways that has been the approach of Facebook. Also I am unsure of the proposition subcribing offers to marketers. Essentially limiting the impressions a brand gets on someone’s wall. I do not think Facebook has fully thought through the implications on that front.

  2. With Windows 8 and Mango on horizon, and probably new iterations of Xbox Microsoft does not look too boring. Remember MS has a social net too which seems to be have been forgotten but who knows might get revamped and have a fresh, fresh incarnation like G+!

  3. Facebook isn’t going anywhere, they’ll be around for a while. Much like Google, recently they’ve been throwing out a bunch of features to see what sticks and most of it hasn’t. It never mattered for Google as Search is still 95% of its business and that is because Google commands search, so why should it be any different for Facebook which commands social? I do think that networks which build off the Facebook and Google platforms can gain significant ground. Cliqsearch is one such company.

  4. This is all true. However those 700 million got used to go to facebook like one goes to their local pub or bar. It’s the place where people meet and share before or after they do whatever they want online. I’m a google fan myself and I’m looking forward to G+ to be big. But until then and while most of my friends are on Facebook I will always check in daily. And this is why Facebook might never tumble like yahoo did.

  5. Stewart McChillin

    “With over 2,000 employees and 700 million users, it’s a lot closer to being Yahoo or Google than it is to the plucky startup whose CEO wears flip-flops and has a business card that says “I’m CEO, b****.” Google has hired more than 2000 new employees in just the past year alone, tough to argue Facebook is too big. I’m astonished at how few employees this $40bil company has…I think we’ve been past the “is Facebook still cool?” debate for a while now – it lost it’s cool a few years ago when everyone’s parents signed up. Personally I don’t use Facebook very often, but I do like it. It might not be cool anymore, but it’s too useful to stop using. People stopped using yahoo when google showed up, it’s so hard to imagine a new social network that could convert hundreds of millions of Facebook users. Then again, stranger things have happened, who knows where google+ will go.

  6. I think the problem for Facebook is that they’re proving to be terrible at monetization. 1 trillion page views per month is converting to ~$350 million. This is not good. At all.

    I’m also not convinced the site itself is all that sticky. It seems like the more people use it, the faster the “in and out” time really is (unless you’re on a Zynga or equivalent game).

    But all that said, I’m not seeing any current threats to them having everyone in the universe on their site, logging in regularly. This buys them a lot of runway to better improve monetization and engagement (and please don’t site the engagement stats from Nielsen; having the window open is not interesting). Having 10 figures worth of free cash flow is not hurting either. Having a lot of brilliant minds is not hurting either. Not moving glacially? Also not hurting.

    2012 will be interesting at Facebook. And if it isn’t, it’ll be remembered as the year all their dominance peaked and they really did become boring.

  7. It’s unlikely that Facebook will fail. Facebook is a perfectly fine social networking tool. It already has a built-in inertia that’s hard to break-off unless you want to be anti-social. However, Facebook does need to create spin-off services for future growth. It can’t just milk on the social networking core service forever.

  8. Leo Dirac

    What a stupid article. If Facebook hasn’t done anything special and just happened to be at the right place at the right time, then why did they win instead of Bebo, Hi5, Ning, Tribe, Xanga, etc let alone Myspace, Friendster, LinkedIn or Orkut?

    Moreover, if you can’t make the connection between the personal data Facebook has aggregated and the ability to monetize ads, then you really shouldn’t be writing about business online, even if you’re reprinting somebody else’s stories.

    • Facebook won because they started at Harvard, the cream of the crop in US social standing. So, that made it cool for the rest of the Ivy League to jump in, which brought along the rest of US collegiate crowd, which made it cool for every one else. I mean, that’s why I got on, because of the other people who were on. But, like all social phenomenon–restaurants, clubs, bands, etc.–it’s day in the sun will pass. Nothing to do with technology, nothing they can do about it. New generations need to distinguish themselves.

  9. The truth is, Facebook is just getting started. Almost everyone in my family is on Facebook – from Canada to the States to the UK. Facebook has created a tool that allows us to communicate in a way we have never before. This past weekend we had a scare in our family. I learned about it late Sunday night on Facebook. Instead of having to answer texts and phone calls from his friends and the rest of my family, my brother posted updates all week on Facebook. A few weeks ago, my cell phone died and I was without service all weekend. I posted a status update letting everyone know that my phone was dead and the best way to get in touch with me is to message me on FB. Well thankfully I posted that status, because my sister-in-law needed to get in touch with me and I was alerted immediately when she messaged me. I am not Facebook fanboy, but it is here to stay.

    • Vladimir Rodionov

      There is a such old thing as e-mail. Your phone has died? Just send out e-mail notification to your friends and family. FB users remind me lemmings. Every one run and I run.

      • So you want me to remember every single email address of my friends and family? In fact I have no idea what the email addresses of half of my facebook friends (I have less than 40). Should my brother have go onto his email and sent an email to 50 different people?

    • kspraydad

      Maybe it depends on when and how you learned to use email but grouping your contacts generally isn’t that hard to do…you’ll notice that FB just launched ‘lists’ in the last two days (basically a rip on Google Circles)….but this concept has existed in email for a long time now.

      • 75 percent of the people I am friends with on Facebook I have never emailed. I never had to email my brother, I never had to email my aunt in Canada. I just didn’t need to. With Facebook it is so simple to send out a status update. Yeah I could spend 15 minutes tomorrow and group my emails, spend a day tracking down everyone’s email address but I don’t really need to and I really don’t want to. I don’t know a lot of other people who feel like doing the same. Email is not the most effective way of communicating anymore.

      • @PC Easy Try communicating with those who do not use Facebook. Those who still use email. You will never meet new people or content or ideas if you have never reach the internet that is not Facebook, or probably you don’t need to. And FB did have and can have downtime too :)

  10. Hmm, if I would have to summarize it:
    The internet is about other peoples content which I can link to. Social is about my content, which I want to be known in my context.

    Two very distinct paradigms and contexts, I think one has to realize that before one can exploit the overlap. In other words people at FB seem to get that concepts from the Internet can’t be easily used in social, while some Internet folks seem not to see it. I don’t see that social in terms of data organization is even close to be mature, remember search was suppose to be solved 90% a few years back.

  11. “some of the failed offerings he mentions are arguably a sign of a company trying to remain innovative”

    I’m confused- how exactly is copying equal to being innovative.

    Facebook has done nothing innovative at all, and if you look closely it’s history is all about doing something to stay/be relevant.

    All these changes they are making – they are struggling to stay relevant because they know that G+ has a better execution of a social network then them. They are just evening things up.

    No matter what Facebook does, it will still be Facebook, because while features are important, it’s the PEOPLE that actually make a social network worth going to.

    If anything, FB is more like Microsoft, always copying and always getting the marketshare. Yahoo copies, but never gets anywhere.

  12. Technology has always been cyclical. Sometimes the cycles are short and sometimes they last 15 years, but rarely longer without catching the next major wave of innovation. Facebook is in its 8th year at the peak of its game. How long can it last? Elgan makes some good points.

  13. Aydin Ghajar

    Are you arguing that Facebook can’t monetize effectively, or that they’ll become huge and profitable – and therefore boring? Sounds contradictory.

    Facebook has attracted some of the best engineering talent in the world & operates at a speed and scale that’s the envy of the industry. To say that their engineering isn’t special is flat out ridiculous.

    Do they have to continue to evolve and respond to competitive pressures? Of course. Is ‘social networking’ maturing as a category? Absolutely. Does that mean that the company is on a decline? Certainly not! Traffic, unique users, and revenue are all growing at a steady clip. All of that argues that sharing photos and playing games IS indeed, still quite interesting.

    • rohit sharma

      +1. Consider the fact that fb delivers a complex application within a few hundred ms anywhere in the world for 500M+ users on all continents and ingests 10s of TB of new data per day. fb Engineering delivers and operates the most complex application e v e r.

      now, as a business whether they become “boring” or not requires defining boring. Yahoo is not just boring, it is a failing business losing traction in its core money machine. The author’s argument ( a la Fox News) that facebook M A Y become “boring” is ridiculous. sorta like saying Mathewi may become boring when/if he is hugely successful and “big”

  14. Burke Culligan

    There are some valid points here… but there’s also some context that missing… execution is critical and often far more important than originality. Also, embracing new ideas from other sites and embedding into something that exists at scale can be a powerful path to additional innovation – the original iPhone brought no new functionality to the phone – but did present it in a new compelling way, etc. and from there it grew into the app ecosystem that exists today. The second and more impressive accomplishment of facebook is bringing what we all consider pedistrian, copy cat features to a massive non-technical audience… literally pulling hundred of millions of users into the future, without them even realizing it – this is very hard to see from a silicon valley POV — but the value of this can’t be overlooked. It sets up a massive user base for future innovations from FB or any company that can be adopted broadly and at scale. Zynga, BranchOut, LinkedIn, etc and others have been able to grow fast on top of this audience because users now get core aspects of the paradigm… Microsoft, Apple’s iOS, etc might be boring and old/slow but the thousands of amazing apps that work on their platforms are amazing and innovative… FB is definitely headed into a platform world… but that is incredibly exciting on many fronts… whether that’s led by FB or other companies on top of the social graph.

  15. Beenyweenies

    I agree that Elgan is wrong about Facebook’s programming/infrastructure being special, because it is. But the bigger question is who cares? It’s the “what” not the “how” that determines a product’s success. You could argue that their fancy infrastructure has prevented downtime and ensures fast page loads but that’s not entirely true, nor have those issues stopped services like Twitter from being a success. They’re down three days a week and people still love it.

    In the end, I think his most important point is that social and the internet are quickly becoming synonymous – in fact, social integration has always been the foundational, underlying promise of the internet. In a matter of years we won’t be relying on a single service to fulfill that need. Facebook should be terrified.

  16. I agree with Elgan’s post. Over the years a very small percentage of the features or products that Facebook introduced have been successful. And all in all, Facebook has always seemed like a mediocre product at best to me. Is it really anything that is impressive about Facebook from a technical or UI view? I don’t think so.

    But I don’t think the copying is such a big deal. It’s how technology improves – everywhere. Unfortunately, the patent system doesn’t really account for that, and thankfully, at least on the Internet, the patent system hasn’t been really enforced, because then things would move a lot slower on the Internet, too. Copying only becomes a big deal when that’s all that you do, and you don’t add absolutely anything new to the table besides having a massive reach.