The Inception,
Success, and Future of Facebook
Ahmad Alnogaly
Fairleigh
Dickinson University
Abstract
Ten decades ago, life seemed rather
plain by itself without the advent of the social networking sites that we have
today. Even though there did exist some social networking companies like AOL
instant messenger which made its first appearance on the internet in 1997 and
MySpace which became popular in 2003, there still weren’t many people on the
internet to truly make social networking sites what they are today. Generally,
social networking fanatics describe their lives before social networking sites
as static and lacking fun. In fact, they believe that most people on the
internet today actually use it simply to connect to one another. Partly, this
may be true since statistics show that social networking websites account for a
greater percentage of online users in the world. People merely go online to
connect, and that is one of their true purposes on the internet. In this paper,
I discuss the inception, upbringing, and success of the popular social
networking site Facebook aside from discussing its future in the next ten
years.
The Beginning of
Facebook
The entry of Facebook changed the entire social networking in a whole
new way. What was once termed as social networking was indeed old and needed a
new spark in it, and this was evidenced by how people started leaving their
original social networking sites which at that time boomed, but due to the new
changes, they ended up preferring Facebook. Facebook’s roots are pretty deep as
well, and its precise conception cannot be ideally pointed to a specific person
following the controversy that followed it soon after it became a hit site. Mark
Zuckerberg, the current CEO and initial founder of the popular social
networking website Facebook faced controversy over who was the original
inceptor of the idea. The site which was once known as “theFacebook.com” years
ago has now become a multi-billion dollar company just after being used in
small campuses in the U.S., but Zuckerberg seems to have stolen the idea of the
social networking site from seniors in his school, Harvard (Carlson, 2010).
Reports say that Mark was given a project by three seniors Cameron
Winklevoss, Divya Narendra, and Tyler Winklevoss to design a social network for
Harvard students and alumni students as well. They simply needed a web
developer to steer forward their idea and this was exactly what Mark was good
at. The sophomore from Dobbs Ferry in New York was actually handed the project
by Victor Gao, another Harvard student who was known for his prowess in coding,
but due to issues, he could not complete the project (Carlson, 2010).
Apparently, Mark fell in love with the idea of creating a social networking
website that would not only touch the lives of campus students within Harvard,
but everywhere else in the world, and these three students had just given him
the drive that he needed to for coming up with a site similar to the one he
wanted to work on, but different in its purpose.
Critics have thus deemed the conception of the idea of Facebook as stolen
and unoriginal based on this idea. This is because they view Zuckerberg as an
idea stealer who managed to wrongfully use another student’s idea and forge it
into its own. Despite attempts to put Zuckerberg in a bad light regarding this
story, his lawyers put up a good case in defending Zuckerberg. In fact, there
was an instance where the accusers stated that Zuckerberg’s hard drive should
be brought forth to the court so that the instant messages between Zuckerberg
and the three students could be extracted to show that indeed Zuckerberg was
guilty of copying their idea, but the hard drive was never brought forth,
leaving many people in the dark about whether Mark had indeed stolen the idea
or not.
These factors however, have not crippled the social media site in any
way, as it continues to amass more wealth and even penetrate deeper into areas
where it had not. Its success rate seemed to also be on the rise in its first
years of inception especially after it had just made its way out of the bracket
of being used within campuses and started being used by the entire world. At
first, Facebook never anticipated to get the ranking that it currently has
since in the year 2006. Exactly two years after Facebook had gone public,
MySpace was in fact the most popular social networking site in the U.S. alone,
and almost everyone including celebrities were fixed on the social networking
site. At this time, people related Facebook more to a campus social networking
site rather than a social networking site that was geared for everyone.
Consequently, Facebook had to pump in lots of effort in marketing and
advertising itself as a new player in the market. Its success rate seemed to be
on the rise as well since analysts predicted that two years later MySpace would
be having half the number of subscribers that Facebook would be having based on
the kinds of trends that were going down.
Destined Success
For Facebook
It was noted that Facebook was getting more and more subscribers each
day, and this success rate could not be attributed to marketing alone. This is
because the Facebook fans themselves were the marketers. A friend would join Facebook
and invite other friends of his to also join Facebook so that they could keep
the conversation flowing. This rapid growth scheme led to a situation where Facebook
was getting more into the spotlight than any other social networking site.
Additionally, Twitter made its way into the field at this exact time, and
rather than competing with the now well-established Facebook and MySpace, it
sought to create a different twist in social networking by incorporating social
networking with microblogging. In fact, the site was launched as a social networking
and microblogging site that would enable its members to send and receive some
140-character long messages called tweets between friends.
By 2007, many people started seeing the success in Facebook and it was
evident that the social networking site was destined for better things in the
future. Microsoft, the leader in developing the popular computer operating
system, Windows, bought a stake in Facebook in the year 2007. In the same year,
Facebook also started allowing third-party developers to come up with applications
for the site. It additionally launched its Beacon advertising system which was
centered on exposing user purchasing activity. It generally worked on the basis
of sending data from external websites to Facebook servers so that targeted
advertisements could be presented. This of course was not to stay forever owing
to the privacy protests that it received from a civic action group called
MoveOn.org as well as many other protestors. In the long run, Beacon was shut
down two years later because of this. In 2008, Facebook had indeed surpassed
MySpace in the total number of monthly users joining Facebook, and it was just
as the analysts had predicted some two years back. Feeling like a giant in the
social networking world, Facebook attempted to purchase Twitter during the same
year, but tweeter felt like it was destined for greater success and never
signed the deal. 2009 saw the ultimate rise of Facebook over MySpace since it
had amassed more than 200 million users which was twice as that of MySpace
(Curtis, 2014).
As Facebook kept growing stronger, MySpace kept getting weaker, and in
2010, Facebook had over 400 million users while MySpace users seemed to have
declined to merely 57 million users down from a previous value of 75 million
users. New competitors tried to join the race in 2010 such as Google’s Buzz,
which was a social networking site that was integrated into Gmail. however it
never went too far. This is because Facebook was gaining even more popularity
with more than 550 million users in the year 2011. This number soon doubled to
one billion users in the year 2012, and climbing to 1.11 billion users by the
year 2013 (Curtis, 2014).
Clearly, it’s easy to see the kind of ladder that Facebook used to get
to the top. Its inception was almost undefined, but with the right kind of
drive, it slowly climbed to a point where nothing about its inception ever
really mattered, and the only thing that was standing in the way of Facebook’s
success was the effort of Zuckerberg’s team. It faced stiff competition from
the initial sites that added meaning to the whole purpose of what defined social
networking sites at that time. MySpace, which was popular at that time, along
with other sites such as Friendster also added to the competition. However, Facebook’s
method of climbing up the ladder was straightforward unlike the story behind
its inception. People were not being added into Facebook by robots or being
tagged along by strangers. The idea of friends getting friends of friends to
join Facebook was the big drive in Facebook’s success (Curtis, 2014).
However, this makes one wonder what else Facebook does apart from
standing out as a social networking site. Additionally, one wonders how it is
that Facebook is trying to stand out from the rest of the social networking
sites and maintaining that spark that it once had in the beginning. In the next
section, we look at scenes behind Facebook and what it does besides connecting
people through their popular website Facebook.com.
The Scenes Behind Facebook
It is a wonder how any social networking site would maintain its
popularity and large number of fans for years without the number of fans
dropping out after a loss of interest in the site. In fact, analysts believe
that the number of Facebook users has reached its peak and will now start
losing its users. Researchers claim that it might only take a year before Facebook
loses 80% of its users, and they based this theory on the rise and fall of
MySpace to predict what will happen to Facebook (Prigg, 2014). Google also
backs up this theory based on the number of searches that hit the web
containing the phrases Facebook or FB. Google noted that in between 2010 and
2013, the number of search queries has stagnated and as we get deeper into the
year 2014, Facebook is indeed losing the number of search queries on Google (Prigg,
2014). Whereas their penetration in the world seems to be on the rise, the same
cannot be said about its users.
There is a sense of boredom with social networking sites among users as
soon as they realize that there is something new and something better than what
they currently have. A true depiction of this theory is with MySpace which lost
a good number of fans as soon as Facebook started stealing the spotlight. The
good thing, however, is that Facebook itself is not blind to this trend, and it
has been doing all sorts of things to keep its users happy and complete within
this single social networking site. Facebook has improved its privacy settings,
making everyone the own bosses of their Facebook accounts such that you only
dictate what is to be revealed and to which extent it is to be revealed (Prigg,
2014). The addition of third-part apps to the site also bodes well with its
success rate since Facebook is finding more ways of keeping its users happy and
satisfied. However, all this is not sufficient enough, and Google’s findings
clearly reveal that a lot has to be done by Facebook if it plans to stay at the
top. Its current global rank is at position two, just one position shy of
beating Google which sits at the top (Alexa.com, 2014). With the decline in the
number of users, Facebook has been spreading its wings to become something more
than a social networking site like the way MySpace was since they had figured
that their trend might lead them straight to where MySpace currently sits at.
Garner everything
at any cost
News about Facebook’s acquisitions only hit the web when major companies
like WhatsApp or Instagram are being sold for billions of dollars, and it would
be easy for the average person to claim that Facebook has not more than five
acquisitions in total. This, however, is totally false, since Facebook has been
getting its hands busy in acquiring other companies during the years it has
been in service. There have been over 40 acquisitions made by the company in a
span of seven years (Jain, 2014). While most people believe that these
acquisitions are benefitting Facebook in that it is getting revenue from the
running of these sites, Facebook actually refers these acquisitions as talent
acquisitions in that the products that they acquire are always shut down so as
to clearly bring forward Facebook and what it has to offer. Some of the notable
social networking companies that it has acquired since 2007 include ConnectU,
FriendFeed, Instagram, WhatsApp, and Friendster.
Contrary to Facebook’s culture of acquiring and shutting down the
products that it has acquired so as to put Facebook on the spotlight, Instagram
and WhatsApp didn’t seem to follow this trend because of the money that was
used to acquire these sites. Billions of U.S. dollars have been used in the
purchase of these two products, and it would be a wrong move to shut down these
acquisitions so as to make Facebook shine.
Acquiring Instagram
Facebook acquired Instagram during April in the year 2012, and it did
have more than enough reasons to settle for this deal despite the huge sum of
money involved. The first reason was that it was actually able to acquire this
amount of money to buy such a big company like Instagram. It had already amassed
a lot of money through its advert systems such that the one billion dollars did
not send out Google to the public so as to acquire cash to make this big
acquisition. Additionally, Facebook never wanted another competitor to add
Instagram into its own system so as to have an upper hand over Facebook.
Instagram, by itself, had already become popular among iPhone and Android users
who loved the convenience of sharing photos through the simple and well laid
out app (Hill, 2012). Big corporations like Google or Microsoft could have
equally acquired Instagram without second guessing.
Additionally, Instagram had done a better job of making a mobile app
which people truly loved unlike the case with Facebook’s mobile app. There was
also the fact that Facebook was getting stale and needed to hype up its
activities so as to increase the number of users that joined Facebook. The mere
act of getting Instagram added over 30 million hipsters in their bracket, and
this was a plus on their side since more users meant that Facebook would not be
falling out anytime soon.
Instagram’s photo sharing experience was also more superior to that of Facebook.
Users loved the fact that they would add cool filters to their photos before
uploading them online, a feature that the Facebook app lacked at the time. It
was also noted that a huge number of Facebook fans usually visited the site
just to look at other people’s pictures and appreciate how they are living
their lives or find humor in some of the funny photos that make rounds in Facebook.
Instagram offered this exact solution and there was no way Facebook could say
no to this deal. Zuckerberg was quick to notice that Instagram was a threat and
acquiring it would be the only way to mitigate this threat without having to
add in a lot of effort.
The move to acquire Instagram also meant something more to Facebook. It
meant that it would now have a better chance of optimizing its ads and bring
you more customized ads based on the kind of pictures that you take. The data
that Facebook acquires from Instagram is worth billions since it provides Facebook
with better metrics of finding out what its fans love and how it can better
help them to serve its users better (Hill, 2012).
Evidently, this move to acquire Instagram was totally worth it as it has
not only provided Facebook with more users, but it has also made it possible
for Facebook to better understand its users by examining what they like. Facebook
then integrates this into their system and helps them to serve their users
better. One billion dollars may have been a lot of money, but the kind of
benefits that this gives Facebook was priceless.
Acquiring WhatsApp
The move to acquire Instagram may have taken the online world by
surprise, but this move cannot be compared to that of the acquisition of WhatsApp.
While Instagram was a big threat to Facebook’s eventual success, WhatsApp was a
much bigger threat, especially when it came to the question of providing the
best instant messenger (Blodget, 2014). In fact, the acquisition of WhatsApp
proved to be the most expensive acquisitions of all time. Standing at $19
billion, Facebook must have had more than enough reasons to purchase WhatsApp,
and it is easy to see why. This sum was split into three sections of which Facebook
accepted to pay $12 billion in stock for the company, an additional $4 billion
for the company itself, and another $3 billion for the founders and staff in
stock grants only of they remain employed by Facebook for a duration of four
years (Blodget, 2014). Unlike the case with Instagram where the one billion
dollar value was easy to come up with and pay off in a flash, the acquisition
of WhatsApp was entirely different.
If we consider the fact that Facebook had an estimated revenue of only
$20 million in 2013 alone, we can conclude that this was a staggering amount
for Facebook since it represents roughly 10% of Facebook’s overall value (Blodget,
2014). However, the real question lies in whether this was a wise move or a
decision that lacked skill and tact.
For one, WhatsApp had a both offensive and defensive value to Facebook
before it was purchased. WhatsApp was a fast-growing company in terms of the
users it had. In fact is the fastest-growing company in history under this
category to ever have that number of subscribers. The continued growth of the
company coupled with the fact that it is now monetizing its users at a cheap
rate of $1 for a one-year subscription will mean that the company will be worth
much more than what WhatsApp was sold for. We also have to consider the fact
that WhatsApp seemed to have been gobbling up users messaging and connection
times which once belonged to Facebook. More people were moving to WhatsApp
since they indeed found it convenient to use because of its simplicity.
However, after the purchase, these users now belong to Facebook. Therefore, the
move to buy WhatsApp allowed Facebook to own what would have been termed as
“the next Facebook” and also prevent “the next Facebook” from eating away Facebook’s
share of subscribers (Blodget, 2014).
Another reason why this was a wise move
is because WhatsApp growth rate and usage was simply mind-boggling. It only
took five years to have 450 million active monthly users, and approximately 315
million users rely on it every single day (Blodget, 2014). This amounts to a
figure of 1 million users every day. Facebook itself used almost six to seven
years to have 550 million users of which the number of daily users was much
lower than this value. Facebook additionally believes that it will only take a
few more years before WhatsApp hits the 1 billion user count of which Facebook
itself has only 1.2 billion years after ten years (Blodget, 2014).
WhatsApp’s simplicity and ease of use are some of the things that draw
users to this popular messaging platform. In addition to making it easier for
people to send instant messages to each other, it has other useful features
such as the ability to send photos, voicemails, and videos to friends (Blodget,
2014). While Facebook could do all these things, it seemingly never paid
attention to simplicity and ease of use of which WhatsApp seemed to have a
better understanding of.
WhatsApp’s revenue model is also outstanding and shows greater potential
than what other messaging apps have to offer. It charges a mere $1 for a one
year service after a user has exhausted the first year of service. Assuming
that the current users do pay up this dollar, this would amount to a revenue
stream of several millions of dollars from this app alone, and without much
effort.
Additionally, WhatsApp was running on very low costs which make it to be
wildly profitable. It had a mere employee count of 55 (Wagstaff, 2014). If we
assume an all-in cost of roughly $200,000 for every employee, this creates a
total base cost of $11 million. If it grows to a value like 300 employees in
the next few years, this will create a cost base of roughly $50 to $70 million,
and as the company’s trajectory keeps on increasing, it would not take long
before WhatsApp starts raking in a billion dollars in revenue in profit
(Blodget, 2014). Evidently, $19 billion for WhatsApp seemed to be a fair deal which
Facebook was quick to note.
Facebook in the
next 5-8 years
All that we’ve seen about Facebook is nothing but success so far. While
they may have faced certain hurdles at some points, they have not staggered
from their course, and that is the most important thing for them anyway.
However, trends are revealing that the numbers of Facebook searches are
starting to decline, and this can’t certainly be attributed to the reasoning
that more and more users are now resorting to type in the web addresses directly
into their web browsers.
Analysts such as Jackson (2012) proclaim that the demise of Facebook
will be in about five to eight years. He explains that Facebook will face a
tougher road ahead owing to the shift to mobile which is bound to take place in
roughly 5 to 8 years. He maintains that the common consensus currently in the
industry is that mobile will end up being the next big thing in the next few
years as a result of the rapid smartphone uptake in the few years that they’ve
been out in the market. Jackson went on to add that Facebook loses money in the
mobile industry and merely has simple iPad and iPhone versions of the desktop
experience that it is offering. He believes that Facebook is in fact trying to
find out how to make money on the web since it had $3.7 billion in revenue in
the year 2011 and its revenue was decelerating fast in the first quarter of
this year in comparison to the last quarter of the previous year.
Jackson also adds that Facebook does not have a clue about how it will
make money in the mobile. He bases Facebook’s failure on the three generations
of internet companies and how they work.
Web 1.0 comprises the companies that
were founded during the years 1994-2001. These included sites like Yahoo!,
Amazon, Netscape, AOL, and eBay
Web 2.0 consists of the social sites
such as Facebook itself, Groupon, and LinkedIn. These companies were founded in
the years 2002-2009
Web 3.0 which is currently termed as
“mobile” consists of Instagram and has been running since the year 2010
Jackson maintains that Web 1.0 mainly relied on building something big
with plenty of information so that you can get traffic. Web 2.0 ushered in the
social platforms where getting connected was the main order of the day while
Web 3.0 comes in as purely mobile-focused sets of companies who do not bother
with setting up websites. His perception is that the kind of success that each
of these generations need is different and that companies which were born in
their individual generations are finding it difficult to succeed in the generations
that follow them. A good example of this is Google’s Google Plus which aimed at
being a social networking site to rival Facebook. While it does have a number
of users, its success cannot be comparable to that of Facebook since these two
corporations began in different generations.
Jackson also believes that twitter is inherently a mobile company since
it started out as an SMS messaging service, and it stands to do better than Facebook
in the next couple of years. In response to the fact that Facebook had acquired
Instagram which Jackson himself listed as one of the companies that was on the
right path, he concludes that history suggests that the growth of this union
will be stunted as part of a different entity rather than left to create their
own.
Consequently, it is easy to see that there is a lot of uncertainty in
what will follow Facebook because of the fact that they dwell in a different
generation and the fact that its move into the next generation may not be that
fruitful. Google Plus is a neat example of Google’s attempt to move into a
generation that is not its own, but this has not resulted in a lot of success
since Facebook still sits at the throne as the social networking giant.
Jackson’s (2012) perception that companies which are now targeting the mobile
are destined for more success than those which are targeting the web is true
when we bring in the story behind WhatsApp. The app does not base its services
online, but rather on the smartphones which are now cropping up, and this might
be a reason for its success. However, the fact that Instagram and WhatsApp have
been acquired by a corporation which sits in another generation makes Facebook’s
success questionable.
All in all, there is much room for Facebook to keep its users happy and
satisfied. Its history may not have been one that is full of struggles, but it
surely does pay attention to what the users need and what makes them happy. Facebook
has also played its cards right in acquiring different organizations like
Instagram and WhatsApp which have the potential of taking its success on a
whole new level. The acquisition of WhatsApp in particular stands as one of the
best deals that Facebook has ever made so far, and this might have an impact on
the number of years that Facebook will still boom the online world. However, a
brief analysis of what happened to MySpace cannot blind us to the fact that the
future might have something entirely different for the social networking site.
The existence of different generations of internet companies stands to pull Facebook
out of its race, and eventually wiping it out just the same way that MySpace
was wiped out.
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