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CEO Mark Zuckerberg’s long-term, grand vision for Facebook is that all industries will, eventually and to their great profit, re-invent themselves through “social.”By “social,” Zuckerberg means through a partnership with Facebook.
His view is that Facebook will, in turn, collect value from the value it creates.
In this vision, Facebook has already re-invented the gaming and news industries, and next it will re-do movies, e-commerce, TV, banking, and beyond.
Facebook, Zuckerberg says, would like to help small social companies grow large, and large companies grow social.
The problem with this theory is that Facebook can be an unreliable and even dangerous partner for any company that bets big on its platform.
Just ask Zynga.
Zynga, which makes Facebook games, went public last year with a stock price around $10 and now trades for around $2. It just pre-announced disastrous Q3 earnings. Most of the blame for this downfall is owed to Zynga itself, which is in a hits-driven business, and has produced progressively smaller hits over the past year or so.
But the initial push that started Zynga’s plummet came from it’s most important partner, Facebook.
Zynga became a multi-billion dollar company in under five years because, better than anyone else, it figured out how to use Facebook’s viral channels — the News Feed and Notifications — to get new users for its games.
Then, about two years ago now, Facebook changed almost everything about how companies like Zynga could attract new users through its viral channels.
Facebook did this for the benefit of its users, who felt that Zynga was being too spammy. Ever since then, Zynga has been unable to produce a huge hit.
This was probably a smart move on Facebook’s part. It has consistently put users first, and now it has been rewarded with one billion users.
As smart as it was for Facebook, however, you could forgive Zynga CEO Mark Pincus for wishing Facebook hadn’t done it. You can also imagine that many of Zynga’s backers and employees now wish they had never invested their time or money into a company that depended on Facebook so much as a partner.
Zynga’s downfall illustrates that most of all, what Facebook needs to do to achieve Zuckerberg’s vision, is be a reliable, consistent partner.
It’s having a hard time doing that.
At the company’s F8 conference last fall, Facebook told the world that partners would soon be able create their own infinite variations on the traditional “Like.”
Just 10 months later, Facebook has changed its mind. TechCrunch’s Kim-Mai Cutler reports:
Facebook is cutting back on the types of actions that are allowed (presumably due to spam or messy use cases). Now apps must use authorised actions like ‘Listen,’ ‘Read,’ ‘Watch,’ ‘Like,’ or ‘Follow’ if they want to automatically publish into the ticker or news feed as they consume content. Developers can still create custom actions like “run” or “cook”, but a user has to click a button in order for that activity to be shared.
Again, Facebook is making this change to protect its users from spam. That’s smart.
But whiplash changes like these and the ones that doomed Zynga will also have the negative effect of making venture capitalists and entrepreneurs wary of investing their money and lives in startups that depend on a platform that changes so fast.