Has Facebook peaked?

By Stephen Foley

Its users are bailing out, there are concerns over privacy and even murmurs that it’s going the way of MySpace. But the death of the social network that changed the world is greatly exaggerated, says Stephen Foley.

If one is to believe Bill Gates - and who wouldn't? - we ought to offer our congratulations to Mark Zuckerberg on his engagement to long-term girlfriend Priscilla Chan. Strange that we got no relationship status update from him, no little heart icon, but we will let it pass, and wish them well.

If you're a Facebook investor, though, perhaps you might worry just a little bit. For we have also just learnt that Facebook's growth has stalled in its biggest territories and user numbers have gone into reverse in the United States and Britain.

If Zuckerberg is taking his eye off the ball, perhaps he is not alone. At some point we all have to get our heads out of cyberspace and focus on our real-life relationships. Is that what is happening?

The criticism of Facebook is piling up. Hardly a day goes by without the discovery of some new privacy concern, from an outcry over its adoption of face-recognition technology as standard in Europe to political speechifying against the amount of information it has amassed on us (thanks to us voluntarily handing it over). Add these to the nagging doubts we have always had about our addiction to the service. Why am I poking this person? Should I have something better to do than throwing digital sheep? Would I be more productive at work if I didn't click on so many videos of kittens? Is Facebook the equivalent of throwing acid on my brain and watching my attention span slowly dissolve?

But don't forget to counter this with the joy of old friendships rekindled and existing friendships kept fresh despite the obstacles of distance or time or sporadic bouts of social laziness.

There is something a little odd about the palpable excitement that Facebook's critics felt at the news that its user numbers in the US declined from 155.2 million at the start of May to 149.4 million at the end of the month, and that its user numbers in Britain fell by more than 100,000 too.

The figures, published by Facebook Insider Gold, are derived from the data that Facebook itself presents to potential advertisers, so they might be more reliable than data from outside measurement firms, but they might not, either.

In any case, they represent one month, and the very most they can show is that Facebook can no longer be certain of stellar growth in the countries which have adopted it most widely. It is still on course to pass 700 million users worldwide as it surges in countries which until now had remained impervious and where other, locally-based social networks have dominated. If it cracks China, it could add another 50 per cent again. No wonder Zuckerberg is learning Mandarin.

But as for its earliest markets, not everyone in Britain or the US is going to want to be on Facebook. It is going to find its level. In both countries, more than half the population now has a Facebook profile. We could be about to find out where the level might be. What we are not about to see is the collapse of Facebook. And to that, I say: good.

The accelerating of the news cycle began with 24-hour rolling news television, but the internet has increased this phenomenon exponentially. Shiny new political candidates seem to trounce the establishment warhorses nine times out of 10. And so it might be in the case of Facebook. We are almost aching for the next new thing.

I will admit it is not very hard to imagine an apocalyptic future for Zuckerberg's creation. If its meteor-like rise to world domination proves anything, it is that things change fast on the internet. We are still in the early stages of an enormous experiment about how we link our online and real lives, about the possibilities of the web, about how much is too much when it comes to sharing. And never before has it been so easy to seek out and try new experiences.

It costs nothing but a few moments of your time to check out a new website or app. There are 350,000 apps available for the iPhone alone.

Old-school websites are scrambling to build in social functions to every web page. Multibillion-dollar businesses can be created out of thin air in a matter of months. More than 16 million people have bought a voucher from deal-of-the-day website Groupon (in New Zealand: grouponnz.co.nz) to use at a local business, spending US$645 million ($803 million) in the first quarter of this year alone, and Groupon did not exist three years ago. We are prone to frenzies and fads. Millions of people were playing a version of Scrabble with their friends via Facebook two years ago. This week, I am more of an Angry Birds man. And it costs next to nothing to bring a new idea to life.

Angel investors and venture capitalists have showered hundreds of millions of dollars on entrepreneurs with an idea for a new social networking business, but the money is parcelled among thousands of developers.

This is not the dotcom era of a decade ago when you had to invest heavily in servers and computer storage, and blow a wad on marketing to win visitors to your site. Now it's pay-as-you-go, renting computers in the vast data warehouses created by the likes of Amazon, while marketing takes care of itself thanks to enthusiastic early users sharing their experience.

As well as new rivals to be scared about, Zuckerberg ought to worry that the Facebook-killer is already in our midst. Twitter, despite its silly 140-character limit and its byzantine set of codes and rules for sharing links and pictures, has exploded to more than 200 million users, publishing 2200 tweets per second.

And something happened two weeks ago. Apple said it would be integrating Twitter, not Facebook, into the heart of its iPhone and iPad software, so that you could Tweet pictures and links at the touch of a button.

Australian online marketing consultant Jeff Bullas made the observation that this, at a stroke, turns Twitter into the Apple-approved social network for mobile devices, opening up a world of possibilities that, right now, we can't even dream of.

At the very least, Bullas says, it will prompt millions more people to sign up to Twitter, and he adds: "The other reality to keep in mind is that the mobile smartphone use will far exceed laptops and PCs as the web becomes increasingly mobile and wireless ... I think the effects will be major and the ramifications will rumble through the web over the next few years."

Cyberspace is littered with the rusting hulks of social networks that went off like a rocket only to burn out soon after. Friendster was the social network du jour in the US when Zuckerberg was still at Harvard. It had well over 100 million users at its peak. This April, it said it would start deleting all those abandoned photos and messages from users past. In Britain, Bebo was once the No 1 social network, but user numbers have fallen back to earth.

And then there is MySpace, which Rupert Murdoch is desperately trying to off-load from his News Corp empire after failing to find a way to make it profitable.

In the heady days of 2005, the Arctic Monkeys became one of the biggest bands in the world without having a record contract, merely from stoking buzz about their music on the site. Today, user numbers have collapsed and even those people that remain are spending much less time on the site. MySpace once seemed too big to ignore. How can we be sure Facebook is too big to fail?

Nothing is certain, but Facebook is an order of magnitude larger, and the activities its users can do on the site are more and more various. Also, the statistic that more than half the population is on the site understates the network effect. If you are on, it is likely that you are of a generation where a vast majority are on, which means you are missing out on considerably more of what your friends are doing than you ever were if you didn't join MySpace.

I think you can trace back to May 2007 the moment when Facebook ascended to a different league from those previous social networks. That was when Zuckerberg threw open the source code of its website so that other computer programmers could develop games and other apps for use within the site. That was when it revealed its aspiration to become a foundational layer of the internet, rather than just a website.

On the Facebook website, users could now play games with each other and interact through a myriad of new apps that Facebook itself would never have come up with. More recently, it has been trying to extend its reach outside of the website, so that other sites know who you are simply by dint of your being logged in to Facebook.

That is what has caused the privacy concerns, and generated some backlash, not least because the company is still failing to produce a comprehensible system for opting out of these services. But where my first instinct was to hate the "Big Brother" aspect of all this, I am increasingly finding it more convenient for things such as posting comments under news stories or sharing articles and videos - something that erases the need to laboriously sign up for every last website.

You can also discount concerns about "Facebook remorse" - the idea that young people who filled up their profiles with party pictures are now pulling down these pages in case potential employers look through them.

Most users already self-edit, and most employers look indulgently upon these things. I don't think I am alone in taking a utopian view of all this, that the Facebook generations, as they grow up, will forgive quite a lot of the behaviour that count for "gaffes" or "scandals". Facebook is actually getting better, not worse. That is why it seems unlikely these latest figures presage the beginning of the end.

I should include a couple of the reactions from Facebook's spin machine from all the headlines the figures have provoked.

"From time to time, we see stories about Facebook losing users in some regions," says a spokesman.

"Some of these reports use data extracted from our advertising tool, which provides broad estimates on the reach of Facebook ads and isn't designed to be a source for tracking the overall growth of Facebook. We are very pleased with our growth and with the way people are engaged with Facebook. More than 50 per cent of our users log on to Facebook on any given day."

The other thing to note is that we don't really know if Zuckerberg is engaged. Gates called Chan his "fiancée", but anonymous Facebook executives claimed that would be news to them. So hold the congratulations on that one, perhaps, but feel free to give him three cheers for his creation.

And in a personal appeal, John, Jonathan, Tim and Sunny, please join the network, you are the last of the Facebook refuseniks among my friends and you won't get an invitation to my next party otherwise.


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