Will Facebook end up like Microsoft after making the same closed platform strategic mistake?

Until about 1996, Microsoft was the most significant company in tech, arguably the only significant one. Then Mr Bill Gates misread the emergence of the Internet, and by that one fateful mistake embarked the once-exciting company he had built from nothing on a long path towards decline and irrelevance. The parallel with Facebook in 2010 is not as forceful as all that, of course: Facebook has not achieved anything like Microsoft’s dominance of the tech sector; its ambitions, however, are arguably just as great. Yet, just like Microsoft then with its-ill-fated Microsoft Network, Facebook is trying to go against the very core purpose of the Internet: its function as a means of exchanging information, worldwide, in a completely open and neutral way.

And while the spring’s privacy issue was not comparable in scale with Microsoft’s long-past strategic blunders, it was a major one. After the huge backlash against their attempt to force users to share more of their profile information than most would have been willing, and after initially resisting for quite a while, Facebook effectively rolled back almost all the offensive changes, and is now actually bending backwards, outwardly at least, to accommodate privacy concerns. Of course the retreat wasn’t really sincere: as late as April 2010, Mr Zuckerberg was openly saying he didn’t believe in privacy.

One goal he has not given up on, however, is his wish to push towards ever-increasing control of Facebook users’ online lives. On the sidelines, another change has been afoot that hasn’t really anything to do with the privacy issue: Facebook is effectively squeezing out third-party applications and attempting to replace them with its own in-house content.

Facebook’s strategy, for some time now, has been to focus its efforts on inciting its users to interact with the new Facebook pages, which must necessarily be public, to the detriment of anything else. In the process, users are also being offered fewer and fewer options to display any information not part of their standard Facebook profile. In order to avoid annoying users, this has been implemented rather stealthily, without ever being announced on blog posts. Groups, for instance, were removed from profiles as part of the new profiles rolled out in April, then brought back in October in the form of new, ‘private’ groups, without the old groups, which have effectively been killed off, being resurrected. Being removed from profile pages has effectively killed off old-style groups and I, for one, certainly no longer visit mine.

Facebook, like all the other major players in tech, wants to box its users within a walled garden

Anyone attempting to use Facebook as an open platform will have very real experience of why it is not an open company. I had yet another example of it yesterday, when I uploaded three photographs to my Flickr account. While I have no illusions about my true talent as a photographer, I do expect to be able to thrust every one of my masterpieces into the sight of my Facebook friends by posting a link to them on my wall. Over time, Facebook has gradually made the sharing of this information increasingly difficult, and you had to be pretty persistent to push stuff to your wall from any outside service: even when they nominally existed, channels dedicated to this purpose on Facebook have tended to be dysfunctional; Facebook cynically allows them to break. Yesterday morning, my photographs failed to appear on Facebook’s wall. The ‘bug’ that caused the feature to vanish without any announcement follows the same pattern that had affected previous methods of sharing imported stories:

Imported stories going away
Imported stories going away: Since the feature was instituted in 2008, you used to be able to import feeds from other social networks such as Flickr, Delicious, or GoogleReader. The feature had been broken for quite a while, with Facebook never following up the bug reports. In the fall of 2010, the feature was quietly discontinued.

The obvious reason for this is to ‘incite’ users (by giving them no other choice) to publish their photographs to Facebook rather than third-party sites if they want to share them with their Facebook connections. The fact that Facebook’s photo posting service is significantly inferior to Flickr’s won’t be a concern for the 98 percent of users who don’t care about such things, especially as Facebook has gone some way, by increasing the size of the photos stored from 720 pixels to 2048 pixels on the largest edge, to make its own photo storage service a little less awful:

Facebook pushes its photo service
Facebook pushes its photo service: Facebook announced on October 8 2010 that it was increasing the resolution of photos stored on its platform eightfold, in an obvious attempt to incite its users to stop storing them on external sites.

Thus Facebook’s strategy has been to try to make anyone with a Facebook account use Facebook for as much of his online activity as possible, to the detriment of everything else. In addition to photographs, this has been obvious in a number of areas:

  • perhaps the easiest, from Facebook’s perspective, has been email; younger users, especially, have massively given up on ‘traditional’ email (despite it’s having only really been in mainstream use for fifteen years at most!) and use Facebook messaging on the rare occasions that don’t send each other texts by phone; this has actually happened without Facebook having to do anything about it;
  • links can’t easily be imported into Facebook; you can use Facebook Notes, which can be set to import a RSS stream, but this is only allowed for your own blog, and you are warned that “If you import too many blog posts in a day, you could be blocked from writing or importing new notes, and this could result in your account being disabled”; I use Twitter, which can be linked to Facebook to share most of my links;
  • after entering a search agreement with Microsoft in 2008, Facebook entered the search market itself in June 2010, although it’s too early to tell whether it will achieve a meaningful presence in that eminently oligopolistic market;
  • after location services, which is Facebook's latest diversification, other fields in which it may try to expand, such as voice or browsers, are at this point pure speculation, but the mere fact that these fields of diversification are being discussed is evidence that its hegemonic pretensions are taken seriously by analysts.

Profiles have changed their appearance constantly, as Facebook’s strategy edged slowly towards locking users into its platform

As pointed out by Inside Facebook, Facebook’s strategy on profiles has been confused, reflecting its ruthless quest for more control over its users’ information shared on its platform:

Facebook’s treatment of application integration with the profile page has been an interesting story over the years since the Platform launched. Initially after the Platform opened in 2007, profile boxes became an extremely powerful way for applications to spread “virally.” At that time, app boxes could be installed on user profile pages in either a “wide”format on the right side of the page, or a “narrow” format on the left side of the page.

Since then, however, Facebook has taken significant steps to change the way apps have presence on the profile. Facebook removed the “wide” format option, and height-limited the “narrow” format option, instead encouraging developers to get users to publish News Feed items and install tabs for their applications. While this hurt distribution for many apps that were primarily designed to be viral profile widgets, Facebook actually largely viewed allowing profile boxes so much profile real estate as a danger for the long term growth of the service.

Why? Ultimately, Facebook believed that allowing too much flexibility in profile design would affect user engagement. As a result, while other sites like MySpace allow relatively deep customization of the profile page for “self expression” purposes – everything from background images to color palettes – Facebook has instead chosen to make the stream the consistently dominant element of the profile page. It’s almost as if Facebook views profile boxes as a mistake, that they’ve had to gradually undo over the last couple of years.

A couple of months ago, Facebook announced that they were moving toward iFrames instead of FBML for both canvas applications and Page tabs. Then on October 8, they announced that tabs—which Facebook had introduced in 2008 and had until recently been pushing as a substitute for application boxes in profiles—would be removed from November 3, except on Facebook Pages—which, unlike profiles, are necessarily public and thus a better medium for monetisation. The tabs I had set up on my user profile, as a way of sharing the rest of my web presence with my Facebook connections, will have to go; the developers whom Facebook had encouraged onto its platform for the purpose of creating applications when it was still pushing the feature are unlikely to be pleased by the change in strategy:

Facebook application tabs going away
Facebook application tabs going away from user profiles: Facebook had only recently pushed application tabs as a substitute for box profiles. Just one month later, the feature was discreetly deprecated.

Facebook’s reaction to a discontented developer on this issue showed that they had no intention of giving in:

Supporting profile tabs and boxes requires a lot of engineering resources that could be used to fix bugs and improve more widely-used Platform products, like the Like button and graph API, as well as the documentation around all of our features. We’re working to simplify our code base and Platform functionality. Additionally, tabs and boxes just don’t scale when users accumulate them over time, so the user experience of these features was steadily degrading over time.

Instead of using the user profile as a destination with app functionality included, you might instead consider building an application that is a social destination.

I have a Facebook fan page to which I have been steering anyone who isn’t a personal friend and wants to establish a Facebook connection. I now can’t display any external information on my personal profile—except Twitter posts, which have been an on-again, off-again feature of Facebook for two years now depending, I suspect, on the current state of the Facebook/Twitter relationship—even, ironically, my Facebook fan page itself. I have in fact been reduced to directing readers of my personal profile to my Facebook fan page in the information box to the left of my personal profile, hardly an ideal solution. Everything else will have to be posted directly to Facebook.

Facebook will in the short to medium-term be able to get away with its walled garden strategy, because the vast majority of its users are actually reassured by it

The reason Facebook has so far been able to get away with its monopolistic walled garden strategy is quite simple: the vast majority of Facebook’s five hundred million users, who are a far cry from the trendy avant-garde experimenters of earlier days, are quite happy to sit behind a walled garden, and to be told by Mr Zuckerberg what they can and cannot see, watch and even buy. Facebook’s marketing strategy towards these people is thus already succeeding, creating value for the company on the back of its members. While Facebook is still far—unlike Microsoft has been for many years and still remains to this day—from being seriously profitable [i], it is indisputable that it has become the dominant player—indeed, the only player— at the consumer, mass-market end of the social web.

The mass market end of the web is not necessarily the best one to occupy if, in accommodating the average consumer, Facebook neglects the needs of more discerning users: the latter will resent being treated like sheep and forced to conduct their entire online lives on a single closed platform: this is more reminiscent of the ‘web portals’ of the type that brought first Microsoft, then AOL and Yahoo to varying degrees of irrelevance, ridicule and doom: it is worth reflecting that the average age of those with email accounts at AOL, while still significant, is over sixty-five. Gmail has now grown to exceed the size of the previously dominant AOL Mail.

In the longer term, Facebook risks becoming marginalised, since the technological minority that originally brought it to prominence by referring it Myspace will be tempted to experiment with other, more interactive platforms

Facebook’s rise to prominence occurred, mainly, over the period 2007-2008 when a growing number of technologically-savvy users opened accounts on it and were rapidly imitated by the masses. Over the same period, Myspace embarked on a precipitous decline from its previous place as the dominant online social network, further facilitated by its own particularly inept strategy, lack of design flair and unfavourable user demographics.

Now that Facebook has become the norm and half a billion people have followed on the techhies’ footsteps, it is inevitable that, at some point, those whom Facebook’s walled garden infuriates will leave, or at least spend time on site more in tune with their approach to social networking. The latter will inevitably arise to meet their demand, in the same way that Facebook arose from nothing in the mid to late 2000s. This will necessarily happen, unless Facebook’s corporate strategy evolves: it goes against the basic underlying principle of openness under which the tech sector has operated since the mid to late 1990s, underpinned by the existence of an Internet connecting all available sources of information. Microsoft wasn’t willing or able to adapt to that environment, and every large operator since its demise has, to a greater or a lesser extent, been tempted to erect a walled garden, either directly to build its product base, like Apple has done, or indirectly by inciting users to generate revenue under cover of openness, like Google.

And once a walled garden has been erected around half a billion humans, it will generate profits and it will take a very long time, perhaps for ever, for those profits to ebb away, as witnessed by the bottom lines of Yahoo, AOL and other dinosaurs left over from the 1990s. But those platforms were deserted a long time ago by anyone with any serious interest in connecting to people and information intelligently. In due course, unless it opens up, the same fate necessarily awaits Facebook.

  1. Its revenue is believed to exceed a billion dollars, but it is likely to be operating at break-even and the days are not that far away when potential investors were concerned about its unsustainable burn rate.