In 8 Years, Facebook Changed All We Do Online

In the storm that is Facebook's IPO, we pause to take note of the way the social network has transformed the way we live now.  

 Is Facebook worth the $100 billion or so its pending IPO suggests it is? Who the good gracious knows. But one thing we can all be certain about is how the social network has radically changed people's behavior 

and expectations online in the eight short years since it was a nary more than a twinkle in the eye of its baby-faced founder(s). Those changes have had the monumental impact of facilitating the formation of entirely new industries and dramatically shifting the way brands market themselves online.

There are things we do online today, that we take so much for granted that we forget that some of them didn't exist even as recently as two years ago. And others were so radical they inspired outright rebellions when they were first introduced. And yet all of these things are not only commonplace today, they are the presumed paradigms. To operate any differently would seem downright odd.

If past is prologue, we're confident Facebook will continue to innovate in the years to come, thereby continuing to transform how individuals and businesses interact online and creating a whole new set of economic opportunities. Whether that translates into enough revenue to merit a $38 share price, we'll leave up to the number-crunchers on Wall Street. For now, however, we want to pause in this brief respite before the Nasdaq frenzy slated for tomorrow to pay homage to a few of Facebook's game-changing innovations.

 

The Death Of Email

I was in London last winter, and while walking through a train station, I overheard two people talking about coordinating with a third person. "I'll reach out to him on Facebook," one of them said. When I was in Afghanistan last year, at the rec center of every single military base I was on, anywhere from half to two-thirds of troops were on Facebook. When you only have access to computers for half an hour at a time, Facebook becomes the most efficient way to let friends and family know what you're up to and catch up with their news. When I found out that an old boyfriend had had a kid but hadn't emailed me the happy news, I was momentarily upset until a mutual friend told me, "I think he just posted it to Facebook." The social network has become one of the primary ways that people communicate today. Certainly it hasn't supplanted email altogether, but, globally, it has become the go-to channel for a slew of use cases that used to be managed by email or phone--or simply not communicated at all. So much so that it's spawned an entirely new industry of social networks-for-business, like Yammer, Chatter, Podio, and Edmodo.

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Zuck And Cover

Browse through Fast Company's most in-depth coverage of the Facebook founder.

Zuckerberg graced four Fast Company covers.

May 2007 Instagram wasn’t Zuck’s first experience with $1 billion offers. Five years ago, those offers were for Facebook, the ragtag operation of a college dropout who transformed it into Palo Alto's sweetheart. Read "The Kid Who Turned Down $1 Billion."
March 2010 Two years and 550 million members ago, Zuck was in a good place: Facebook had all but vanquished MySpace. His company was finally making money. And he was ready to take on a new dragon: Google. Read Most Innovative Companies 2010.
November 2011 Facebook is both smaller and younger than Apple, Google, and Amazon, but Zuck's ambitions are huge. And his growing pool of star engineering talent could be enough to put Facebook on top. Read "Why Facebook Will Win" from our "Great Tech War Of 2012" feature.
April 2012 One thing that could have derailed Facebook’s road to Internet domination was Zuck’s lack of experience. Why growing up was the most important thing the “Boy CEO” did to solidify his company. Read "American Idol."

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Sharing

In the good old days, if you wanted to let friends and family know about something cool you'd found on the web, you'd copy a link to the website into an email and send it off to your nearest and dearest. What a difference two years make. Yes, it's barely two years since Facebook made it possible to slap the Like button onto content on external websites, which in turn has expedited communication about everything from news stories to videos to photos to fundraising appeals, making Facebook the leading referrer of traffic to many content sites, as well as probably being responsible for helping get innumerable Kickstarter campaigns funded.

 

Single Sign-On

Remember the days when you had to produce a unique user name and password for every site you visited on the Internet? Then, remember how freaky it was when all of a sudden sites started inviting you to sign in with your Facebook credentials, and how we were all worried about what that meant about who would suddenly know what about us? And yet, today, we take this system (which has been adopted by others, like Twitter and Google) for granted. And maybe even get a little cranky when we have to set up independent log-in credentials at sites that don't integrate with Facebook. And this system (Facebook Connect) hasn't just made our lives more convenient, it's helped accelerate a whole new industry of apps and websites that have been able to get up and running faster, because they haven't had to build their own identity management systems but instead were able to just plug in to Facebook's (the same way they get up and running faster because they can use Amazon Web Services rather than building out their own server infrastructure).

 

Personalized Ads

Raise your hand if you've had this experience recently: You're watching TV (probably online), and the ads come on. You notice that they're for things you have no interest in, and you actually get a little ticked off. After all, all these sites are now supposed to know so much about you. If that's the case, you grumble, then why are you being shown an ad for a minivan, or a Disney vacation, or any number of products and services you'd never in a million years think of using? Thank the social network for that. It now gives advertisers unprecedented specificity in who they want to reach. That's why, for example, Airbnb will pop up in my right rail when Oracle OpenWorld is in town, asking if maybe I'd like to rent a room to a conventioneer. To which I respond: "You know, that's a pretty good idea…." Suddenly the ads are interesting again.

 

Facebook Pages As Company Websites

Try this: Open up a consumer magazine, like a cooking magazine, for example. Flip through the ads, and make a note of how many list a Facebook URL as their web address, rather than a company website. Remember back when producers of packaged foods or house cleaning products tried to get you to go to their websites? No more. More often than not, they'll send you straight to their Facebook page. The social network has created powerful tools for brands to build excitement (and evangelism) among consumers, and companies are choosing to use those pages as their primary home on the web. Even GM, which provoked a stir earlier this week when it was reported the automaker was killing its $10 million Facebook advertising budget, said it would nevertheless continue to invest in its brand pages--to the tune of $30 million, no less--because, the company said, "it continues to be a very effective tool for engaging with our customers."

 

Searching Gives Way to Discovering

Back in the late '90s, with the arrival of sites like Amazon and Google, commentators bemoaned the loss of serendipity. The web was now a place where you had to know what you were looking for in order to find anything. No longer would shoppers, and others, have the delightful experience of browsing, as they did in real-world stores, or libraries, and tripping across something splendid but thoroughly unexpected. The social network is helping shift the balance back toward discovery. It's increasingly the place, for example, where people discover the news, via links friends share. And it's also making discovery possible on other sites, by giving those sites tools that let their visitors filter content by Facebook friends, whether it's Yahoo, for example, that integrated with Facebook to let you see what your friends are reading on its news sites, or design store Fab, which allows you to browse a feed of items that your friends are buying and favoriting. The result is that the web is increasingly a place for serendipity, facilitated by Facebook and your friends.





src:~http://www.fastcompany.com/1837657/facebook-innovation-how-the-social-network-changed-everything-you-do-in-8-short-years

Facebook: The Ultimate Dot-Com

Facebook: The Ultimate Dot-Com

Paternot and Krizelman, in 2001

History will record that Mark Zuckerberg wasn’t the first college student to have the idea of enabling people to set up Web pages and share stuff with their friends. Yesterday, my colleague Silvia Killingsworth wrote about the Winklevoss twins, two Harvard grads who famously accused Zuckerberg of stealing the idea for Facebook while working on their fledgling site Connect U. Before the Winklevii, there were the folks behind MySpace and Friendster. And before them, way back in 1995, there were Todd Krizelman and Stephen Paternot, who launched TheGlobe.com from their dorm rooms at Cornell.

TheGlobe.com allowed people to create their personal space online, upload pictures, and set up what came to be known as blogs. By 1998, it had more than two million members, which was then considered impressive. It also had a business plan: sell advertising. On November 13, 1998, Bear Stearns issued 3.1 million shares in the company at nine dollars each to some of its clients—the lucky ones. When Bear’s traders tried to open the stock for trading, they found it difficult to establish a floor price. As I recalled in my 2002 book, “Dot.Con: The Greatest Story Every Sold” :

Whatever price they indicated—$20, $30, $40, $50—was too low. CNBC reported that the first trade might be $70, but even this proved to be a conservative estimate. After a lengthy delay, the first trade crossed the ticker at $87—almost ten times the issue price. Even for an Internet stock, this was unheard of. Within an hour, the price had risen to $97.

TheGlobe.com’s I.P.O. marked the beginning of the dot-com bubble’s epic stage. By the time the bubble burst, in March and April, 2000, hundreds of online firms had issued stock, among them many clunkers like Pets.com, E-Stamp, and etoys.com (not to be confused with a later company that used the same name), but also many online companies that survived and eventually thrived, such as eBay, Amazon.com, and Priceline.com. The bursting of the bubble discredited the term “dot-com,” which was understandable but, in a way, unfortunate, because the term itself had come to be the expression of an attitude that saw in online communication and online commerce boundless possibilities. Facebook’s I.P.O. represents a return to that mindset. It’s the fulfillment of the dreams of the nineties—and a reminder of their potentially fatal attraction.
While the term “dot-com” disappeared, the idea survived. Before very long, it was rebranded as “Web 2.0”—a term popularized by Tim O’Reilly and John Battelle, who from 2004 onwards organized a series of conferences under this banner. Supposedly, what distinguished Web 2.0 from Web 1.0 was user control, and user collaboration, with the network serving as a “platform,” but that wasn’t really a new idea: Krizelman and Paternot had fastened upon it years earlier, as had the founders of GeoCities and other Web-hosting ventures.

What really got Web 2.0 going was the proliferation of broadband connections, the invention of top-notch search engines (Google), and the creation of idiot-proof tools for doing fun stuff online, such as sharing photos and videos, posting blogs, and creating mashups. By February, 2004, when Zuckerberg launched Facebook, the elements were in place for the Web to fulfill the hopes of the late nineties—or some of them, anyway. But if Zuckerberg was in the right place at the right time—nobody should underestimate the role that the “Harvard” brand played in Facebook’s initial growth—he seized the opportunity ruthless and brilliantly. Now, seven years later, he is about to become a billionaire many times over by selling (non-voting) shares in what is, in many ways, the ultimate dot-com.

Back in the late nineties, I used to read a lot of S-1s—official investment prospectuses produced by companies about to issue public shares for the first time. Delving into Facebook’s S-1, which it has amended repeatedly since February, when it put out an initial version, felt like old times. The numbers were different (by an order of magnitude) from those that the original dot-coms used to put out, but the basic story was the same one that had led to all those bad investments and broken dreams: a Web site expanding this fast, with this many eyeballs focussed upon it, has simply got to be worth a lot of money.

Certainly, Facebook’s growth has been astonishing. As of March 31st, some nine hundred million people—about one in eight of all the humans on the planet—used the site at least once a month. More than five hundred million people—about one in thirteen of the global population—used it daily. Every day, Facebook users upload about three hundred million photographs and generate about 3.2 billion “likes” and “comments.” People on Facebook have a hundred and twenty-five billion “friends.” For many of us, Facebook has become a part of daily life. Many use it to keep up with friends; some use it as a news service; I’m in the camp of those who utilize it mainly as a professional tool. (Once I put up this post, I will link to it on my page.)

Compared to the late nineties, there are some basic differences, of course. Unlike many of the original dot-coms, Facebook makes money—quite a lot, in fact. It sells advertising and also charges other firms that use the site to drum up business, such as the gaming company Zynga and the music service Spotify. In 2011, on revenues of $3.7 billion, Facebook generated a billion dollars in profit. In the three months to March 31st, it made another two hundred million dollars.

That’s reassuring, but does it justify a valuation of a hundred billion dollars? That’s what the company will be capitalized at if the underwriters, led by Morgan Stanley—another echo of the late nineties—price its stock at the upper end of the $34-$38 range they indicated on Tuesday. If the stock goes up when trading starts, and it almost certainly will, Facebook will be even more highly valued. While I don’t think Facebook’s stock will enjoy the sort of crazy leap that TheGlobe.com’s took, I wouldn’t be at all surprised to see it close over fifty dollars, which would value Facebook at more than a hundred and twenty-five billion dollars.

For such a figure to make sense, given the risks attached to the technology industry, you have to assume that, within a few years, Facebook will be making not a billion dollars a year in profit but five billion dollars, or ten billion dollars, or even more. Apple, the world’s most valuable company—its market cap passed six hundred billion dollars briefly last month, and is currently hovering at a little more than five hundred billion—generated more than twenty-five billion dollars in profits last year. Microsoft, which is valued at less than half of Apple, made more than twenty-three billion. Google, valued at about two hundred billion, made nearly ten billion.

If it is to compete with these giants, Facebook will need to find a much better way to monetize its vast user bases. At the moment, it generates barely four dollars a year in revenues per user, primarily in the form of charging fees to advertisers. Maybe it can gin up more of these revenues, but there are still questions about the effectiveness of ads on social-networking sites. General Motors’ decision to pull its advertising from Facebook, which was announced yesterday, is hardly encouraging. Neither is the fact that Facebook still hasn’t properly figured out how to deliver ads to mobile users.

Simply relying on attracting more and more people to the site won’t do the trick. As the site’s audience approaches the saturation point in many advanced countries—more than sixty per cent in the U.S. and the U.K.; more than eighty-five per cent in Chile, Turkey, and Venezuela—its rate of expansion is inevitably slowing down. Between March, 2009, and March, 2010, the number of monthly active users rose a hundred and fifty-four per cent. Between March, 2011, and March, 2012, the growth rate was forty-one per cent. Quarterly figures confirm the slowdown. In the first quarter of 2010, the growth rate was 26.5 per cent. In the first quarter of this year, it was 8.9 per cent.

Another disturbing sign—and one very familiar to students of the dot-com bubble—is that Facebook’s costs are rising considerably faster than its revenues. Between the first quarter of 2011 and the first quarter of 2012, as it hired more engineers and sales people, and continued to invest in the site, its costs shot up ninety-seven per cent. Revenues rose by forty-five per cent. Consequently, Facebook’s profits in the three months to March were actually lower than they were a year earlier: two hundred and five million dollars compared to two hundred and thirty-three million.

None of this necessarily means that Facebook will be a bubble stock, or that it will meet the same fate as TheGlobe.com, which saw its market capitalization shrink to virtually nothing in 2001 before it closed down for good in 2008. Despite the recent slowdown in its growth, Facebook is an innovative, profitable company, which has established a unique and ubiquitous online presence that it may be able to exploit in ways that nobody, not even Zuckerberg, has yet dreamed of. I’d be willing to bet that in ten years’ time Facebook will still be around, and it will be a big player on the Web.

But how big? In Silicon Valley, many people view Facebook’s Web site, and its trove of user data, as the next key technology platform, something akin to Microsoft Windows and Apple iOS, which the company will leverage to create its own economic ecosystem—one that generates huge monopoly rents. Perhaps this will happen. For now, though, Facebook is basically an online media company, and there are some legitimate questions about its prospects. In purchasing its stock, as with buying the original dot-com stocks, investors will be laying out their cash primarily on the basis of hope and optimism rather than a clearly defined and firmly established business plan.

To me, at least, that has echoes of the past.

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