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The Dirty Suicidal Secret of Facebook

The Dirty Suicidal Secret of Facebook

At the core of the dot-com collapse was the problem that folks running a lot of companies simply lacked the key skills necessary to run those firms. Both Google and Facebook are demonstrating behaviors suggesting they too lack critical skills, and unless that is fixed, their initial success will eventually be overshadowed by their catastrophic failures.

By Rob Enderle
07/09/12 5:00 AM PT

The last time we had a major "social networking" type of effort it was with collaboration, and the poster child for the effort was Lotus Notes. It largely failed -- not because the idea wasn't a good one, but because the company fundamentally didn't understand that the market was being made hostile to the concept.

In short, while collaboration technology might have worked prior to the 1980s, changes in how employees were measured and compensated increasingly ensured that it couldn't work in the years following the creation of Notes. Not understanding the human and organizational aspects of collaboration doomed Notes to failure as anything but a complex email platform.

Social networking faces similar challenges in that the firms driving it don't appear to have developed skills in understanding people or advertising -- both of which are critical to the long-term success of the products. Entire classes of ads aren't working, and trends indicate that users are becoming tired of the sites and moving on.

The core problem is failure to understand the mechanism that makes social networking work or the science of advertising.

I'll end with my product of the week: the amazing Tesla S, the car from the company that will likely fail if Obama loses.

Notes Failure

Back to Lotus Notes. Collaboration was a great idea, because the standing belief was that folks wanted to work together and that many, if not most, of the problems in companies were due to lack of internal cooperation and collaboration. This was likely true. However, the solution was created by engineers without collaborating with ethnologists.

What they didn't notice was that over the decade or so prior to the creation of Notes, people had been discouraged from collaborating in the U.S. by policies that came from the Equal Employment Opportunity Commission, which was a misguided attempt to fix discrimination.

What the EEOC drove were policies like forced ranking, currently being blamed as a primary cause for Microsoft's lost decade. Ironically, this practice is now the core of a Microsoft discrimination suite. The policies were designed to treat employees equally but had the unintended consequence of pitting them against each other competitively.

Policies like this provided strong incentives against collaboration and fueled not only sole contributor efforts but behaviors that resulted in increased stealing of credit from others. If you strongly feel the person you are collaborating with will either steal credit or steal your raise, it is unlikely collaboration will be successful -- and that went to the core of Notes' failure.

Don't get me wrong, Notes had other issues -- but if its core strength couldn't be realized, then its core value was false, and it's failure was preordained.

As the owner of Notes, IBM could have driven a smarter employment trend to fix internal measurements (it is currently driving the Smarter Planet initiative), which would have made both Notes and collaboration in general more successful -- but it didn't see the problem. It is this same blindness that plagues firms like Google and Facebook.

Why Google and Facebook Will Fail

Google+ is a joke in social networking, but it could be the canary in the coal mine for Google itself, because it showcases that Google fundamentally doesn't understand how people and advertising work. Engineers generally don't understand people, and behavior is core to both social networking and the advertising that funds it.

Google, at its founding, appeared to believe that ads were somehow evil and tried to distance itself from them even as it built a business that was funded by them. This kind of internal conflict doesn't bode well for Google's long-term success. The firm is in the ad business, like it or not, and yet it seems to be doing everything it can to fund any other business it can think of.

Strangely, most of these new businesses are eventually somehow tied back to ad revenue. For instance, Google's new Nexus 7 tablet is sold at cost with the idea that secondary revenues, including ad revenue, will support it.

Facebook is clearly having major ad problems -- kind of playing out like an episode of "Mad Men" at the moment. Some types of ads are working, but traditional display advertising has failed, and even the types of ads that are working are likely becoming less valuable as the noise on the site increases.

In short, Facebook is dying -- but not due to competition, regulation, or any other external pressure. It is dying because Facebook is slowly, accidentally, committing suicide.

In the end, the problems with Google, Facebook, and social networking appear to come down to developing products that are based on modifying behavior using ads and technology but only developing one of those three internal skills. Neither firm has a deep understanding of how ads or people work, particularly among the critical executives running the companies.

Wrapping Up: Dot-Com Revisited

At the core of the dot-com collapse was the problem that folks running a lot of companies simply lacked the key skills necessary to run those firms. Both Google and Facebook are demonstrating behaviors suggesting they too lack critical skills, and unless that is fixed, their initial success will eventually be overshadowed by their catastrophic failures.

Lotus, Netscape, Palm, and a host of other firms are no longer with us because of similar failures and not realizing that initial success doesn't lead to long-term survival if you don't develop the skills necessary to ensure your model works.

These firms are hardly alone. We are seeing publishing firms crumble because they thought they were in the content business and never realized, after decades of living off ads, that they were in the ad business all along. If they understood that one simple thing, they'd likely have been able to ride out the current digital storm -- but they didn't. Many more will be gone by the end of the decade.

So, in the end, the lesson here is that whatever your source of revenue and profit are, that is the business you are in, and if you don't understand the core aspects of that business, eventually you will no longer be in it. So the dirty secret, if you haven't figured it out, is that Facebook and Google don't understand either social networking or advertising, which suggests both firms are in for a troubled future.

Product of the Week: The Tesla S

Product of the Week

The future of the electric car industry is tied to Obama, much like alternative energy was tied to President Carter years ago. Right now, the odds look very similar to those surrounding Carter's re-election -- in some ways, Carter was better off than Obama is -- and that doesn't bode well for electrics like the Tesla S.

That is unfortunate, because the Tesla S is an amazing car -- but it still costs too much to survive without government help. I'm a big believer in an electric future, and even though the current gas-based ecosystem and slow charging make electrics useful for only a few of us, for those who can use them, the Tesla S is the best choice by far.

Tesla S

It does 0-60 in an estimated 6.5 seconds, which is good for class, but there is a performance addition that does it in 4.4 seconds, which is supercar fast. It has the appearance of a Lexus, and a 17-inch Nvidia-driven screen that is simply amazing to look at, though it is a bit distracting.

Inside, it is very comfortable for four, unlike a supercar, which is lucky to seat two comfortably. With the federal subsidy, it is under $50K -- less than many luxury cars -- and the performance edition, at $84K, is still far cheaper than the old Tesla roadster, and faster and more useful as well.

Because it is the first electric car I think I could love, the Tesla S is my product of the week.


Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.


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