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Rory Cellan-Jones

Facebook - growing up fast

  • Rory Cellan-Jones
  • 1 Jul 09, 08:42 GMT

Remember when Facebook was the scrappy kid on the social networking block, with its teenage boss (ok, he's now old enough to order alcohol in most states), its devil-may-care attitude to money, and its apparently casual approach to grown-up issues like privacy and unsuitable content?

Just a year or so back, it was MySpace which seemed far more mature - it had a lucrative advertising deal with Google, a wise old parent in Rupert Murdoch, and employed dozens of consultants around the world to deal with the concerns of regulators and politicians.

But now MySpace is fading fast, shedding hundreds of jobs, closing offices around the world, and saying goodbye to its founders Chris De Wolfe, who has left, and Tom Anderson, who is reportedly being paid to stay at home, while still being the automatic "friend" of all new joiners.

By contrast, in London this week I came across evidence that Facebook is growing up very rapidly, meeting two new executives who appear to symobolise the company's new-found respectability and confidence.

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I was in the company's compact Soho Square premises - they're moving round the corner to a bigger place in Carnaby Street next week - to interview the chief operating officer Sheryl Sandberg.

What exactly is a COO? I'm never sure - but at Facebook it seems to mean the person who runs the business while Mark Zuckerberg concentrates on the cool stuff. Sheryl Sandberg has one of those very scary CVs - a Harvard MBA, then a spell working as chief of staff to Bill Clinton's treasury secretary Larry Summers, then a top job at Google before heading to Facebook.

And her message to me was not about some new way of sending friends virtual sheep or making your profile look really cool, but something far more surprising - Facebook is actually making money. Or at least is on course to be "cash-flow positive in 2010."

Now a decade ago when every dotcom measured its worth in "eyeballs" on its site, and claimed it was on course to break even pretty soon, I'd have been quite sceptical about Ms Sandberg's forecast. But back then the whole point was to race as fast as you could towards an IPO( a stock market float) or a takeover by a bigger business so that you could cash the huge cheque from gullible investors and go on making losses for years.

Facebook, by contrast, appears determined to stay independent, despite selling small stakes at astronomic valuations to both Microsoft and a Russian media firm, and rumours of an impending IPO sparked by the appointment this week of a new chief financial officer.

Yet it is obviously spending pretty freely - the cost of servicing 200 million users around the world who all want to upload photos and generally keep the servers humming is growing by the day.

I put it to Sheryl Sandberg that each new user, especially those in less lucrative advertising markets like India, must be costing the company money - but she insisted that wasn't the case:

"Not only are we covering our current costs but we are making major investments in our growth all over the world and our revenue from advertising is covering those costs."

I've been sceptical about the ability of any social network to make serious money from advertising - who wants soap powder messages in the middle of a conversation with friends - but Facebook says its revenue is up 70% year-on-year in the middle of the worst recession many in the advertising business can remember.

True, a 70% rise compared to a period when the company made small change from ads may not tell the full story - but Facebook appears confident that it's cracked a way for advertisers to be part of the conversation rather than an intrusive annoyance.

And the other person I met at Facebook's London office symbolised the firm's determination to deal with its other challenge - regulation.

Richard Allan, a former Liberal Democrat MP and then director of European government affairs at Cisco, has been hired to lobby European regulators for Facebook.

With the EU mulling over tighter privacy rules for firms that share their users' data, and with continuing concern from politicians about issues like cyber-bullying and hate-speak on social networks, there will be plenty on Mr Allan's plate.

So, yes, Facebook suddenly looks like a mature business, poised for steady progress towards profitability and ready to engage in grown-up conversations about its place in society. Then again, so did MySpace a year ago, until it suddenly went out of fashion.

So Facebook now has to work out how to be both grown-up and cool at the same time - never an easy trick to pull off, as my children sometimes remind me.

Comments

  • Comment number 1.

    Funny how things change so quickly in on the web...

  • Comment number 2.

    It has been known from quite a while that Facebook was superior to MySpace in almost every way.
    The worst mistake MySpace could have done was sell itself to Rupert Murdoch. The man still belives that people should have to pay to access newspapers on the Internet!
    Another former Internet giant relegated to the cyber graveyard.

  • Comment number 3.

    It still beats me how a web site can make money from ads - I have NEVER intentially clicked on an advert on a web site let alone actually purchased anything. I am sure I am not alone in this behaviour.

  • Comment number 4.

    Facebook managed to make the adverts on the page relatively subtle (much like Google managed to do early on) so the user experience is not spoilt. Myspace has always had their adverts in your face, flashing and taking up most of the page. Add to this the clumsy user interface and Facebook was always going to win.

    To put it simply, user experience is key. Myspace has always had a horrible user experience - who wants to sit there navigating through the flashing adverts trying to work out how to add a photo or arrange something differently? Facebook on the other hand is inclusive, and doesnt scare people away, they kept it simple.

  • Comment number 5.

    Despite its popularity, myspace was never really in the mainstream, not properly. As a 27 year old, I'm of a generation where the internet only really took off as we entered the last couple of years of school, so the internet wasn't a part of people's lives growing up, like it has been to subsequent generations. My generation viewed chat rooms and message boards as "geeky", so for most the idea of spending time online "socialising" with people was viewed as a bit strange. Facebook came along at just the right moment, when people of my age and older got into social networking. Most people on my myspace "friends" list are people I've never met in person; by contrast, I don't think there's anyone on my Facebook "friends" list who isn't at the very least a one-time acquaintance. This is the difference - myspace never quite reached the non-techy elements of society, probably not helped by the fact that 90% of profiles are garish and quite frankly look immature; facebook profiles, on the other hand, can't be changed by members, most of whom don't have the slightest idea how to make a web page readable on screen or even the most basic knowledge of HCI (human computer interaction).

    My only facebook friends who have myspace profiles are the ones who used message boards etc over the past decade, and they've all transferred their focus onto facebook. I think the main reason for this, other than just being the current Zeitgeist, is that myspace is more akin to a pen pal service, putting you in touch with people who, on paper (well, screen), look like they should be your friend due to shared interests, but you might not actually hit it off in person, whereas facebook is more for communicating with established friends who have moved away or people you used to work with, or just acquaintances who you really got along with. In short, it's for strengthening existing ties, rather than trying to manufacture new ones.

    In short, facebook is for arranging nights out and commenting on the photos afterwards. Myspace just seems like a never-ending stream of friend requests from rubbish bands and spammers, with adverts taking up 50% of the screen and people trying too hard to show their "individuality" with yellow text on orange backgrounds. Strangely enough, it all seemed to go pear-shaped when a certain media tycoon bought it. Funny that...

  • Comment number 6.

    Myspace is such a horribly user-unfriendly site on peer to peer level that im not surprised its dying.. The only thing Myspace has going for it is Music.

    Its basically just a free website for artists, thats the only use.

    Whereas Facebook is actually for users to interact with real friends, no spam, no huge loading times while waiting for somebodys favourite song to blast out etc.

    Myspace was a reasonable idea, awfully applied. Facebook is a much better idea, applied in a much better manner.

    They're almost beyond comparison I'd say.

  • Comment number 7.

    A few months ago I received an email from MySpace advising me that if I continued not to bother to use my account with them then it would be closed down. Fair enough - I think I only used it once or twice when I first set it up to view a few bands and then have moved over to YouTube as my primary source of accessing music video. I happened to mention to my 14 year old daughter that I needed to engage with my MySpace account to keep it up and running and her response was that a 40+ male should steer well clear of MySpace as this would be considered highly inappropriate and be perceived in a very negative way by what appears to be a mainly teenage (girl?) audience. This was all very much news to me and I have certainly followed her advice - apparently mature males have no place on MySpace as determined by the majority of its current audience. When a public social networking platform fails to accommodate all demographics [unlike the all embracing, fully inclusive Facebook] then you know they are on to a bad thing. RIP MySpace.

  • Comment number 8.

    All i ever get from myspace these days i hundreds of friends requests and messages from spammers it is like there is only bots left on it not real people. it is absolutely ridiculous. I used to love it when i was younger now it should just be shut down and. If they ever want it to work again they will need to close it down and start all over again with better software to find spammers!!

  • Comment number 9.

    Speaking as the owner of a branding/communications agency, I have to say that Facebook advertising does actually work... we've seen it being really effective for our clients, in a direct and measurable way.

    MySpace brand seems to have drifted into a 14-22 yr old bracket, primarily music related.

    Facebook users seem to like using the site to natter/stay in touch - and they aren't as averse to advertising as some might think.

  • Comment number 10.

    Typical case of Good Product vs Dump Product

    The good one won this time.

    I just wish my friends would stop taking those annoying quizzes on facebook, I have to block each one individually.

  • Comment number 11.

    What about the problem of click fraud on ads which Facebook was slow to acknowledge existence of, and seems unable to do anything about?

    See the recent articles on TechCrunch:

    http://www.techcrunch.com/2009/06/21/facebook-click-fraud-enraging-advertisers/

    http://www.techcrunch.com/2009/06/26/facebook-click-fraud-101/

    Click fraud, the general treatment of advertisers and the ad approval process' horrible inconsistency is costing them high $xxxxx's a DAY as advertisers abandon the platform.

  • Comment number 12.

    It still beats me how a web site can make money from ads - I have NEVER intentially clicked on an advert on a web site let alone actually purchased anything. I am sure I am not alone in this behaviour.

    -------

    No one ever directly buys most stuff they see on TV either, it's mostly about brand placement, getting into peoples minds so that next tme they need a new car they look at the models on the forecourt and remember how wide the smile of that blonde driving the Renault was.

  • Comment number 13.

    Facebook's less is more approach to design was much appreciated. Myspace pages blare awful music at you the moment you enter - Facebook pages are discrete and easy to navigate. The entire user experience is very easy, and despite a few complaints, the latest design of the home page is much better.

    No, I can't believe that Facebook will be 'cash positive' but it looks like Twitter is relying on the age old policy of their business model being "we'll work it out later" too - so at least they'll have some company when they sink.

  • Comment number 14.

    I believe we are already entering the post-Facebook era. I am 27 years old and was part of the MySpace craze. I have recently "deactivated" my Facebook account, and several other my other friends are doing the same thing one by one over the last few months.

    The reason I got rid of my account was that I found it had this time-consuming addictive quality to it. I began spending an increasingly amount of time constantly looking at what everyone else is doing. I'm pretty social person by nature, however with Facebook I even started feeling almost a sense of anxiety that I was always missing out on something. I was constantly comparing what I was doing to everyone else, or seeing what I missed out on.

    I also feel like people are living less in the moment than ever before in worrying what everyone else is doing and not appreciating what is happening in their own life - they are far more concerned with projecting the image of their life, and taking photos of it to upload as opposed to living and enjoying the moment.

    Since I've deleted my account I actually feel a sense of freedom again, like I'm not obligated to any one or two things and I feel ok again with just staying home and doing nothing. It sounds strange, I know, but it's sadly true. My deactivation will likely not be permanent but I have definitely learned a lesson in what's important; we can't forget to live in the moment rather than just projecting an image of it.

  • Comment number 15.

    The web certainly does change fortunes quickly, for the good and bad, but have FaceBook thought of having a subscription service so that we can get rid of all those adverts and have a less irritating experience? I am sure it would attract even more members - it worked for Hotmail and Yahoo Plus.

  • Comment number 16.

    In all honesty I imagine they can support it through ad revenue - and I think ad revenue for them is likely to double per user in the future as more and more companies start using Facebook Ads and get better at doing it - it uses an auction system to - so the ad revenue is only going to increase per user.

 

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