From my archive… July 2012

At the heart of Facebook’s success is a deep and longstanding human desire to connect with other human beings. People like Facebook because it makes finding new friends, or looking up old ones, easy. It’s also a fast and convenient way to stay in touch and share everything from party invitations to baby photos.

Facebook also knows an extraordinary amount about the minutiae of its users’ lives, which is why it targets advertising so effectively. The sheer number of Facebook users and the time users spend on the site each day means Facebook has become a de facto homepage for many people.

But what might go wrong for Facebook in the future?

The first problem the company faces is operational: scaling up a small start-up into a giant corporation. Second is regulation, and this could be tricky. If Facebook continues to be successful it will, at some point, start to resemble a monopoly in the eyes of the US regulators and provoke an anti-trust case. It happened to Microsoft and it could easily happen to Google and/or Facebook.

The third problem is privacy. To date Facebook has been very clever about mapping the connections between people and what interests them and then selling this information to third parties. Much of the time Facebook users have little or no idea that this is happening and those that do know don’t seem to care. But this could change.

The network effects that made Facebook so large so fast could act in reverse if users start to feel exploited financially or no longer trust what is increasingly seen as a rather arrogant and potentially autistic company. As the company grows larger, there will be inevitable tensions between attracting users and getting them to part with their data. The company’s devotion to online openness, or lack of privacy, may cause problems in the real world.

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