Facebook was a late-comer to the social networking market, defying the business mantra of “first-mover advantage.” Why did it succeed so fabulously where the pioneers of the industry, already with millions of participants, have failed so spectacularly?
On April 15, 1999, LiveJournal was launched by 19-year-old Brad Fitzpatrick, as a way of keeping in touch with his high school friends. LiveJournal started as a blogging site that incorporated social networking features inspired by the WELL.
In 2005, when it had 5.5 million users, and was “one of the largest open source projects on the web,” it was sold to blogging software company Six Apart. In 2007, when LiveJournal had 14 million users, it was sold to Russian media company SUP Media which wanted to make it “a major worldwide brand.” In 2012, LiveJournal had close to 2 million active users.
The social networking market was launched in early 1997 by SixDegrees.com, the first website to combine features that existed on other websites at the time: User profiles, listing of “friends,” and the ability to browse friends’ lists, “placing your Rolodex in a central location,” as its founder Andrew Weinreich said at the time. With 3.5 million users, in 1999 it was bought by YouthStream Media Networks which shut it down a year later.
There were many other early movers around the world, but the two prominent ones—and for a while, very successful—were Friendster and MySpace.
“One of the biggest disappointments in Internet history,” Friendster was launched in 2002 and reached 3 million users in a few months. It was sold in 2009 to one of Asia’s largest Internet companies, MOL Global, reaching at its peak 115 million users, mostly in Asia. Friendster was shut down in 2015.
“Many early adopters left [Friendster] because of the combination of technical difficulties, social collisions, and a rupture of trust between users and the site,” said danah boyd at the time. The major beneficiary of these defections was MySpace, launched in 2003.
MySpace did not restrict membership in its network, allowed users to customize their pages and to make them public, and continuously added features based on user demand. By the time The Facebook launched at Harvard University in February 2004, MySpace had more than a million users and was becoming America’s dominant social network.
In 2005, MySpace—and its 25 million users—was sold to News Corp. The next year, it reached 100 million users and surpassed Google as the most visited website in the U.S. But it also started to run into serious problems. “Its new owner,” writes Tom Standage in Writing on the Wall, “treated it as a media outlet rather than a technology platform and seemed more interested in maximizing advertising revenue than in fixing or improving the site’s underlying technology.”
In April 2008, MySpace was overtaken by Facebook in terms of the number of unique worldwide visitors, and in May 2009, in the number of unique U.S. visitors. Why did Facebook become the largest and most dominant player in the social networking market?
In business, timing is everything. There is no early-mover advantage, just as there is no late-mover advantage. In Facebook’s case, the market was ready with rising broadband availability and Internet participation by an increasingly diverse audience (meaning entire families could participate in a social network). Early social networks already conditioned consumers to the idea (and possible benefits) of social networking. They also provided Facebook with a long list of technical and business mistakes to avoid.
A major lesson was controlled growth. Avoiding the strong temptation, especially when a social network is concerned, to grow very rapidly, Facebook started as a Harvard-only network, then expanded gradually, in stages, to other universities, high-schools, and corporate users, requiring a verified email address. This—and its clean and non-customizable design—allowed it to establish a reputation as a “safe space,” in contrast to MySpace. Only in September 2006 it opened membership to anyone aged 13 or older.
Controlled growth also meant gradually building a robust and reliable technology infrastructure, avoiding the technical problems that plagued its competitors. Its initial success and reputation helped attract smart and experienced engineers that invented new tools and technologies allowing Facebook to build its proprietary technology platform, optimized to handle the demanding requirements of serving (eventually) hundreds of millions of users simultaneously.
Having smart engineers also help in developing products not for the sake of developing products that engineers love, but that delight users and keep them coming for more. But constantly adding new features to Facebook was not only the product of innovative minds. It was driven by the ruthless competitive spirit of the company’s leadership. That meant copying competitors’ and potential competitors’ best features. Or buying them (and their teams) outright.
“Good artists copy, great artists steal,” Steve Jobs liked to quote Picasso, and Facebook “stole” the obsession with product quality (as perceived by users) and robust (and home-grown) technology infrastructure from Google. These obsessions helped attract more and more users to both companies, both late-comers in their respective markets, and they came to dominate them. But both companies also made sure they have a sustainable and successful business model and to this aim, both focused on re-inventing advertising.
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half,” said John Wanamaker more than a century ago. Google changed this sorry situation by linking ads to specific (and demonstrable) results. Facebook went further by linking ads to specific (and targeted) users. Buttressed by a string of other inventions in selling and distributing ads online, together they dominate digital advertising, a $209 million market worldwide in 2017.
But Facebook has succeeded by adding one more important ingredient, expertly handled by its founder, Mark Zuckerberg: Public Relations. This has been particularly important to the success of a social network serving 2.2 billion active monthly users (as of January 2018) and especially in light of the maniacal focus on an advertising-depended business model based on mining users’ data, content and actions.
Like other social networks, Facebook has found itself facing user revolt, time and again, when it changed its features and policies and when yet another revelation about its disregard for users’ privacy has emerged.
Zuckerberg answered the ensuing fire-storm with a post titled “On Facebook, People Own and Control their Information,” in which he said “In reality, we wouldn’t share your information in a way you wouldn’t want.” (Kirkpatrick and others attribute the post and this quote to Zuckerberg; as of this writing, this Facebook post is attributed to Kathy Chan).
That promise didn’t help quell the uprising and three days later Zuckerberg announced that Facebook is reverting to the previous terms of service. And he wrote (“with a kind of rhetoric you seldom hear from a CEO,” says Kirkpatrick):
History tells us that systems are most fairly governed when there is an open and transparent dialogue between the people who make decisions and those who are affected by them. We believe history will one day show that this principle holds true for companies as well, and we’re looking to moving in this direction with you. [Contemporary links to that post now lead to the current Facebook news page]
“Internet activists were impressed,” writes Kirkpatrick, and Harvard Law professor Jonathan Zittrain, “wrote an admiring article noting that Zuckerberg had encouraged Facebook’s users to view themselves as citizens—Facebook’s citizens.”
Mastery of public relations, among other things, explains Facebook’s success. It may well help it weather its current crisis of confidence and trust.