The Beginning of the End of Facebook

Facebook risks leaving the (very large) segment of the market looking for a privacy respecting social network (like we had in, oh, 2006) wide open - NYT:

A few months back, four geeky college students, living on pizza in a computer lab downtown on Mercer Street, decided to build a social network that wouldn’t force people to surrender their privacy to a big business. It would take three or four months to write the code, and they would need a few thousand dollars each to live on.

They gave themselves 39 days to raise $10,000, using an online site, Kickstarter, that helps creative people find support.

It turned out that just about all they had to do was whisper their plans.

“We were shocked,” said one of the four, Dan Grippi, 21. “For some strange reason, everyone just agreed with this whole privacy thing.”

Its not just them - we know of a few startups thinking of how to build "the next Facebook". And the timing is fairly good. We observed some years ago that the whole market for Social Networks is very early stage, each new one evolving out of the lessons of what worked and didn't in the last generation. Our analyisis of Social Nets that we did in 2008 said that each one has about 18 - 24 months unchallenged leadership before the next one starts. Facebook has done a bit better than that - probably a sign that the rate of change in the market is declining - but its predictable that new players will start to emerge (We thought Twitter may be it about a year ago, but it turns out that is more a transport infrastructure, although we suspect its architecture will be part of any next generation system).

The main issue facing these new companies is to find a sustainable business model down the line, but for now they have the benefit of starting off on their Freeconomic cushion and disrupting Facebook, which is now coming off its cushion and (seemingly desperately) trying to find real revenue - hence the privacy scraping, which will lead to their demise unless they radically shift strategy.

Update - Benjamin Ellis made a good point in the comments, and I thought it was worth answering on the main page:

The challenge, as we know, is that the utility of any social network is derived from the number of people on it.

Facebook captured the mass audience. A fragmented set of competitors would never have achieved the same thing.

The answer is open standards, but the reality is that open standards for soc.nets. are problematic and a workable model has yet to emerge. It's going to take a lot to topple Facebook!

In our 2008 analysis they tended to die with a whimper:

(i) The cool people leave (very noisily) to another New New Thing and they suck their followers' activity away.

(ii) New people join this New Cool Thing, not the Old New Thing - the growth starts to look good, the press picks it up, it becomes sexy, more people move over

(iii) Over time the Old New Thing gets less and less growth, then starts to decline, and this is happening while they are trying to monetise it (typically its been sold by then to someone who actually has to run it as a business, Facebook is too expensive so its IPO or bust) so as cost becomes an issue, there is less and less investment in it so it starts to look tired. The press picks this up and amplifies the un-coolness

(iv) There is often an "over the top" grab for control of the user's experience by the management which p*sses off the remaining users. Granted Facebook is doing it consistently now already, so its users are being groomed for privacy abuse in a way, but if you look at their history there is nothing to suggest they won't do something like this as well.

At some point it turns into a ghost town - all the avatars and walls are still there, but there are few new posts and its clear no one lives there anymore apart from a few real diehards who have made small parts of it their own