Facebook’s New Reality and The Case Against Hyper Scale

Facebook was once viewed as invincible. When chatting with VCs, investors, and many in the business world, there seemed no safer bet than Facebook’s hyper growth business. It seems the invincibility of Facebook carried over into the mainstream media given the amount of backlash we received when we published some recent research on US adults that suggested 9% of US adults on Facebook had deleted their account and 17% had deleted the app off their smartphone. It was entertaining to watch the numbers of people on Twitter respond to our research saying we were crazy or the data was flawed. Most of this coming from people who have no idea how to do research or the details of solid methodology but that is a different discussion.

But it isn’t just our research confirming some changing behaviors of US adults and their Facebook usage. This report from Pew Research, which was conducted a few months after our research, not only confirms many of our same findings but has even more US Facebook users reporting deleting the app of their smartphone than ours did with 26%. Interestingly, it isn’t just ours or Pew’s research confirming thus, but I’ve read no less than three private studies from Wall St. investment banks all turning bearish on Facebook citing their research showing a change of behavior amongst Facebook users.

I have no doubt something is changing amongst Facebook users, and Facebook knows it. Anyone using Facebook is seeing regular Facebook messages in their feed attempting to assure users that Facebook is doing everything it can to preserve the community, focus on people and relationships, making sure toxic material is not used to divide, and a host of other positive messages. Facebook would only do this is they are very concerned and seeing data that suggests US users are becoming less engaged.

After we published our research, we shared a number of charts, but the one below is one we have not shared before. I picked certain answers from this overall sentiment question to save space and focus on ones that I believe are the most telling. (Click the image to enlarge)

Personally, I’m not sure Facebook recovers from this. It certainly doesn’t help that they keep having issues with hackers and data breaches. At a high-level the little trust users had in Facebook is quickly eroding. But the reality for Facebook is their users aren’t actually going anywhere. While I do think there will still be small pockets of people who stop using the service, I think the big impact will be people using it less. But I do not think there is a large scale opportunity for an alternative to Facebook. People have spent years building their network on Facebook, and there is too much sunk costs in Facebook in terms of human time. Staying in touch with friends and family remains the single largest indicator of US consumers motivation to keep using Facebook, and that isn’t going to change.

Facebook used to be a place where US consumers would spend a significant amount of time browsing, killing time, and generally using Facebook as a source of entertainment. All of that has changed, and I have strong doubts consumers will go back to that behavior. Instead, Facebook usage may be driven by events or moments in time instead of general daily browsing. Things like a loved one got married, someone you know is sick or dealing with a trial, or just something very personal you want to stay informed about that is happening with a friend or family member. These more specific events seem like more logical drivers of Facebook usage than the prior behavior of using Facebook being fun or entertaining since it is generally no longer such a place.

Making a Case Against Hyper Scale
In big-picture conversations about the future, I tend to make a point that sometimes seems controversial. I’m not sure we will ever see a company with multi-billion users like Facebook or Google again. I know one should never say never, but my hunch is the kind of scale Facebook has achieved is unique and the result of a point in time not the new normal.

Every company who reaches hyper scale, which is a billion users or more, becomes the target of malicious attacks. Some companies, like Apple, handle this better than others but just look at Microsoft, Facebook, even Google as examples of bad actors looking to exploit their platforms. This is inevitable when a platform has so many users, and as Facebook has proven, this kind of scale is not for everyone.

While I make the case that we may not see a company with such scale ever again, I talk with many startups and investors for whom this kind of scale is the goal, and often I argue it should not be. The hindsight view of such scale companies is that too often the compromises are not worth the costs. Sure, some people may make a great deal of money, but there are many negatives beyond that. Once a company gets to that scale, and is public, it then faces financial pressure that is honestly unhealthy and sometimes dangerous. There seem to be much more positive stories and customer experiences around companies who focus on owning their niche and profiting greatly from that niche. The problem is the VCs, investors, and often entrepreneurs crave that, but it comes at a cost and always will.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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