Facebook has a big problem. Facebook’s big problem is Facebook.
Social networking applications are not like other businesses. In other businesses, new products built within an existing infrastructure and delivered through existing marketing and distribution channels benefit from economies of scale that help generate higher profits than would be possible on a standalone basis.
Yes, social networking applications benefit from economies of scale in production, marketing, and distribution channels, but they have a unique property that presents a unique challenge: the network itself.
There are two reasons why no single company will ever “own” the social web:
First, social behaviour online, as offline, is largely informed by the context of that behaviour. Am I conducting this behaviour in front of my family, my friends, my co-workers, my best friends? Photos, videos, events, locations – the success of an application on a social network depends as much on the composition of the network as it does on the feature set.
In other words, my connections and the default privacy settings used to mediate my interaction with those connections can contribute as much to the value of an application as the design and functionality.
A location sharing feature is meaningless to me in the context where the default is to share with the 459 friends I’ve accumulated from who knows where on Facebook. Facebook could design the greatest location sharing application ever invented, but I’d rather recreate a social network on Foursquare, specifically for the use of that feature, than attempt to navigate the myriad privacy options on Facebook to more appropriately control my sharing.
Second, it’s easier to do one thing very well, than to do many things very well. To get a sense of what I mean, download and play around with Instagram. This application is 100% purpose built for mobile photo sharing. It integrates with Twitter, Foursquare, Flickr, Tumblr, Posterous, and Facebook. There are no other distractions in the application, no other purposes than to take a photo and share it with a group of people that you believe would find that photo relevant. It’s a great experience – just ask one of the one million users who signed up within the first two months of the product’s existence.
Taken together, these two arguments lead us to the fundamental point: the value of the user experience in the purpose built application, both in terms of functionality and appropriate social context, easily outweighs the cost of switching and rebuilding that context from scratch.
Facebook isn’t going anywhere, but they will never “own” the social web. They will forever be limited by their generality.