Facebook, Phones, and Phonebooks

It was a bit surreal to see Facebook founder and CEO Mark Zuckerberg traipsing around the F8 stage carrying an “engine pod” for a Facebook drone designed to beam the Internet to the one billion people Zuckerberg said could not be online due to a lack of access. Zuckerberg himself clearly felt the same way, remarking that “If you had told me 12 years ago that one day Facebook was going to build a plane, I would have told you that you were crazy.”

Still, it makes sense: Facebook has from day one been about getting people online.

Thefacebook

Twelve years ago Zuckerberg started Thefacebook — the company would switch its name a year later — at Harvard as the online version of the freshman facebook that Harvard distributed in print; to join you had to have a Harvard email address and use your own name. But of course you wanted to do exactly that: as Amelia Lester, who would go on to be the long-time managing editor of The New Yorker, wrote in a remarkably insightful column in The Harvard Crimson:

The thefacebook.com scene includes reams of carefully coiffed, immaculately manicured, evening-garbed Harvard students grinning eagerly on page after page as we present our own ideal image of selfhood to fellow browsers…every profile is a carefully constructed artifice, a kind of pixelated Platonic ideal of our messy, all-too organic real-life selves who don’t have perfect hair and don’t spend their weekends snuggling up with the latest Garcia Marquez…There are plenty of other primal instincts evident at work here: an element of wanting to belong, a dash of vanity and more than a little voyuerism probably go a long way in explaining most addictions (mine included). But most of all it’s about performing — striking a pose, as Madonna might put it, and letting the world know why we’re important individuals.

For the next several years, that’s all Thefacebook was: a collection of profile pages that gave individuals the opportunity to present their best selves for the perusal and approval of those in their network. And people could not get enough: Thefacebook methodically spread from college to college, usually signing up the vast majority of students in a matter of weeks if not days.

The phenomenon, according to The Facebook Effect author David Kirkpatrick, was surprisingly one that didn’t appeal that much to Zuckerberg. Kirkpatrick wrote:

Ironically, Zuckerberg was not a heavy user of Thefacebook. Nor, in fact, were any of its founders and early employees. [The summer of 2004] the interns, working with Moskovitz, started to gather data on how people actually used the site. They found that some users were looking at hundreds and even thousands of profiles every day. These were the users they were designing for.

Kirkpatrick noted that Zuckerberg was splitting his time between Thefacebook and a service called Wirehog that enabled peer-to-peer sharing amongst Thefacebook users, something that Zuckerberg was much more interested in personally. Zuckerberg would eventually be persuaded to give up the side project, but this would not be the last time Zuckerberg’s interest in sharing would seem to run counter to Thefacebook’s focus on enabling people to put themselves — their best selves — online.

The Power of Identity

As Lester astutely noted, the identity we build for ourselves on Facebook is our own projection of how we want others to see us, and it has been core to the service from the beginning. Kirkpatrick writes:

Perfecting the details of your own profile in order to make yourself a more attractive potential friend occupied a considerable amount of time for many of these newly networked Ivy Leaguers. Find exactly the right picture. Change it regularly. Consider carefully how you describe your interests. Since everyone’s classes were listed, some students even began selecting what they studied in order to project a certain image of themselves. And many definitely selected classes based on who Thefacebook indicated would be joining them there…Your “facebook,” as profiles on the service began to be called, increasingly became your public face. It defined your identity.

Moreover, Zuckerberg was insistent from the beginning that said identity not be split. Kirkpatrick again:

“You have one identity,” [Zuckerberg] says emphatically three times in a single minute during a 2009 interview. He recalls that in Facebook’s early days some argued the service ought to offer adult users both a work profile and a “fun social profile.” Zuckerberg was always opposed to that. “The days of you having a different image for your work friends or co-workers and for the other people you know are probably coming to an end pretty quickly.”

The power of this approach cannot be overstated: as Lester observed, from a product perspective both vanity and voyeurism are powerful drivers of engagement. It’s also a goldmine when it comes to advertising: the lead that Facebook has over everyone, including Google, when it comes to targeting advertisements is huge. The service knows exactly who you are, exactly what you like, exactly where you live, work, and went to school, all because you told them yourself. And yes, some of your “interests”, particularly in those early days, may have been more aspirational than realistic, but from an advertiser’s perspective, all the better: aspiration is exactly what they sell.

The News Feed Rubicon

It was ten years ago, in September 2006, that Facebook became the product we know today: that is when the News Feed was introduced. Now, instead of needing to proactively visit the profile pages of all your friends to discover what had changed, Facebook would use an algorithm to proactively tell you what changes you might be interested in.

The effect of the News Feed was massive: engagement immediately skyrocketed from already unseen levels, and I have previously argued that the algorithmic nature of Facebook’s feed was a core reason why the service squashed Twitter. Even more important is what the News Feed meant to the bottom line: a feed is the best place to place advertising, especially on mobile, and Facebook has spent the last several years drawing down its old display ad inventory even as News Feed ads continue to grow both in inventory and in price.

The News Feed, though, came at a cost: while Facebook information had always been public to your network,1 the fact that what you posted was being pushed out to people who were “Facebook Friends” but not necessarily real friends was a wake-up call to Facebook users. There were immediate protests, which Facebook rather astutely tamped down, but the longer-term repercussions were real. Kirkpatrick notes:

When people can see what you are doing, that can change how you behave. The reason the News Feed evoked something as intrusive as stalking was that each individual’s behavior was now more exposed. It was as if you could see every single person you knew over your backyard fence at all times. Now they could more easily be called to account for their actions.

Over the next several years a rash of incidents in which people lost their jobs, were denied entry to college, or simply got in hot water with someone close to them were a common media trope. President Obama told a group of high school students in 2009, “I want everybody here to be careful about what you post on Facebook.”

Facebook’s Closed Door

The core of Facebook’s value is its ownership of identity of every person online. To that end, while a drone plane may have been unimaginable in 2004, it fits: the only thing lacking when it comes to Facebook’s role as the Internet phone book are the missing entries for the 4 billion people who are not yet online.

In fact, the most unbelievable part of Zuckerberg’s presentation came a few minutes later, when he discussed Live Video:

People love going live because it’s so unfiltered and person and you feel like you’re just there hanging out with your friends. In a funny way, we’ve found that Live takes some of the pressure off of having to find that perfect photo or video, because everyone knows that it’s live and it’s not curated.

There is, in the subtext of Zuckerberg’s description, an acknowledgment of the need to project your best self that has always been at the root of Facebook, something the News Feed changed from an incentive to an imperative. It is the very thing that fueled the rise of Snapchat, and make no mistake, the selfie-sharing app has Facebook spooked.

Last week The Information reported that Facebook was struggling to stop the decline in “original” sharing — content that users generate themselves, as opposed to sharing a link or a viral video. Bloomberg added a day later:

People have been less willing to post updates about their lives as their lists of friends grow…Instead, Facebook’s 1.6 billion users are posting more news and information from other websites. As Facebook ages, users may have more than a decade’s worth of acquaintances added as friends. People may not always feel comfortable checking into a local bar or sharing an anecdote from their lives, knowing these updates may not be relevant to all their connections.

According to one of the people familiar with the situation, Facebook employees working on the problem have a term for this decline in intimacy: “context collapse.” Personal sharing has shifted to smaller audiences on Snapchat, Facebook’s Instagram and other messaging services.

This is the price of owning identity — of owning all the value that Facebook generates from advertising in its News Feed — and there is no going back.

The Bifurcation of Social

It is increasingly clear that there are two types of social apps: one is the phone book, and one is the phone. The phone book is incredibly valuable: it connects you to anyone, whether they be a personal friend, an acquaintance, or a business. The social phone book, though, goes much further: it allows the creation of ad hoc groups for an event or network, it is continually updated with the status of anyone you may know or wish to know, and it even provides an unlimited supply of entertaining professionally produced content whenever you feel the slightest bit bored.

The phone, on the other hand, is personal: it is about communication between you and someone you purposely reach out to. True, telemarketing calls can happen, but they are annoying and often dismissed. The phone is simply about the conversation that is happening right now, one that will be gone the moment you hang up.

In the U.S. the phone book is Facebook and the phone is Snapchat; in Taiwan, where I live, the phone book is Facebook and the phone is LINE. Japan and Thailand are the same, with a dash of Twitter in the former. In China WeChat handles it all, while Kakao is the phone in South Korea. For much of the rest of the world the phone is WhatsApp, but for everywhere but China the phone book is Facebook.

This isn’t a bad thing; indeed, it is an incredibly valuable thing: Facebook’s status as a utility is exactly what makes the company so valuable. It has the data to target advertising and the feed in which to place it, and it is difficult to imagine any of the phone companies overtaking it in value.

This is why I wrote almost exactly a year ago that Facebook should embrace its position as being something more than just a social network. From Facebook and the Feed:

It’s not inconceivable that, at some point in the relatively near future, it is Facebook that is the default advertising medium, commanding dollars that exceed its already dominant share of attention. Still, this outcome depends on Facebook driving ever-more engagement, and I’m not convinced that more “content posted by the friends [I] care about” is the best path to success.

Everyone loves to mock Paul Krugman’s 1998 contention about the limited economic impact of the Internet:

The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law”–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other!

It’s worth considering, though, just how much users value what their friends have to say versus what professional media organizations produce…Was Krugman wrong because he didn’t appreciate the relative worth people put on what folks in their network wanted to say, or because he didn’t appreciate that people in their network may not have much to say but a wealth of information to share?

I suspect that Zuckerberg for one subscribes to the first idea: that people find what others say inherently valuable, and that it is the access to that information that makes Facebook indispensable. Conveniently, this fits with his mission for the company. For my part, though, I’m not so sure. It’s just as possible that Facebook is compelling for the content it surfaces, regardless of who surfaces it. And, if the latter is the case, then Facebook’s engagement moat is less its network effects than it is that for almost a billion users Facebook is their most essential digital habit: their door to the Internet.

In that piece I said that Facebook had a choice: try to restore its ownership of personal updates, or embrace its status as a utility. Here’s the funny thing about choices, though: all too often the choice is not about choosing one path or another, but about accepting reality sooner rather than later.

The truth is that Facebook chose its path way back in 2004, and cemented it in 2006: it was the place you publicly shared your identity with the world, and you had best take care exactly what that identity was. No amount of live video or original sharing prompts will change that reality, and that’s ok. If anything the real danger to Facebook is that the act of banging their collective head on a closed door will start to damage the utility of, well, their utility.

Clearly there are parts of Facebook that get this: David Marcus, for example, is pursuing a very smart strategy in his attempt to position Messenger as a transaction medium between businesses and individuals. It plays perfectly to Facebook’s strengths, and as WeChat has demonstrated in China, it can be very lucrative. Still, though, for all of the brilliance and strategic acumen he has shown to date, I worry about Zuckerberg. He opened his keynote with a surprisingly political plea to avoid the Trump-ian rhetoric around building walls:

If the world starts to turn inwards, then our community will just have to work even harder to bring people together. That’s why I think that the work that we’re all doing is so important, because we can actually give more people a voice. Instead of building walls we can help people build bridges, and instead of dividing people we can help bring people together. We do it one connection at a time; one innovation at a time; day after day after day. And that’s why I think the work that we’re all doing together is more important now than it’s ever been before.

Leaving aside the irony that Facebook has arguably played a role in Trump’s rise, the reality is that not everyone wants to build bridges all the time. Zuckerberg’s insistence that every individual on Facebook have one identity may have been a masterstroke when it comes to building value, but the truth is each of us contains multitudes: there are parts we want to show the world, and parts we want to show only our closest friends, and the sooner Facebook accepts they can’t have everything the more valuable the parts they own will become.

  1. And Facebook actually included relatively granular privacy controls from the start []