Facebook, Still Dominant, Strives to Keep Cachet

Facebook, Still Dominant, Strives to Keep Cachet
Published: November 17, 2013

When Evan Spiegel peered into a crystal ball to divine a future for his company, Snapchat, he did not see Facebook.

He saw something else, something much bigger — a social network that could exist on its own, outside Facebook.

Facebook is still the dominant social media service, and has been an attractive suitor for many start-ups. And Snapchat most likely spurned Facebook partly because it thought it could fetch much more than the billions Facebook was willing to pay.

But the snub also foreshadows a possible future where Facebook is no longer the default place on the web where people go to network. The swift rise of upstarts like Snapchat in a shifting social media landscape suggests a change in how and where people like to spend their time.

The rebuff also reveals a changing perception of Facebook in the tech industry. As the once scrappy start-up evolves into a sprawling corporation, younger companies who view themselves as disruptive do not find Facebook’s size and cushy campus as appealing. Not to mention that a lot of them are trying to provide alternatives to Facebook, which means selling to Facebook would defeat their entire purpose.

Despite the site’s primacy in the social media market, some numbers suggest that Facebook addiction has given way to Facebook fatigue, at least among some users. A study by the Pew Internet and American Life Project found that the majority of users have at one point or another taken a multiweek break from the service, citing the tedium and irrelevancy of its content. Among the crucial younger demographic — users ages 18 to 29 — that first propelled Facebook into prominence, 38 percent said they expected to spend less time using the site this year.

The survey confirmed what some at the company already knew. In its latest quarterly call with investors, it said its youngest users were spending less time on the service, although overall teenage engagement was stable.

That fatigue may also have started to trickle down to the developers who build apps on top of Facebook’s platform.

The company’s business depends on the working relationships with those developers. In its early years, Facebook carefully courted app developers like game makers, including Zynga. But it later changed its rules to make it harder for apps to go viral. More recently, though, it has been trying to lure developers back with more favorable terms.

At an invitation-only mobile developers conference at Facebook on Thursday, the day after reports emerged that Snapchat had rejected its offer, Facebook product managers pushed mobile developers to incorporate the company’s new social features into their products, which would help it spread its tendrils.

Facebook also pushed them to incorporate tools from Parse, a start-up it acquired for a reported $85 million this year, which provides back-end resources like analytics for mobile apps.

But some developers, who declined to be named because they work with Facebook, said the pitch was unusually aggressive, especially compared with a similar event for mobile developers at Google earlier in the week, and made them less inclined to want to collaborate with Facebook.

Jonathan Thaw, a Facebook spokesman, said that the company has mobile developer events regularly and that it had received very positive feedback from people who attended this particular event.

For any company as large as Facebook, finding new sources of growth is a challenge. Executives there have used acquisitions large and small to help promote that growth. Being able to identify potential targets — and acquire them quickly and affordably — is important for its continued success.

Facebook has had a sharp eye for emerging companies that have succeeded in areas it is eager to enter, like Instagram, the photo-sharing app it bought in 2012 for about $1 billion after intense negotiations. The service, which had 30 million users at the time, now has more than 150 million, and this month, the first ads began appearing in users’ photo streams. In addition, the two companies were a good fit.

Instagram is largely autonomous, but uses Facebook’s resources and advertising expertise while helping its parent company understand how photos and video are changing social networks.

“Facebook and Instagram are spiritual brothers,” said Sam Altman, a tech entrepreneur. “They are motivated by the same things, and that is why it worked out so well.”

Facebook’s recent $120 million purchase of the Israeli mobile software company Onavo also fits squarely into its plans for the future. Onavo gave Facebook important technology as well as vital information on how competing apps are being used on iPhones and Android devices.

Other deals have not worked out so well, whether because of a lack of simpatico or something else.

“The gap between the billion-dollar valuation companies and the people who are trying to do something fresh and new is growing,” said Frédéric della Faille, the founder of Frontback, an up-and-coming social sharing application. “Money is not the only goal. Do you need an enormous amount of money to be happy, or are you content to go along with the ride?”

Recently, Facebook failed to acquire Waze, a crowdsourced mapping service for drivers that provides real-time traffic and route updates.

Discussions dragged on for weeks with little progress, according to two people with knowledge of the talks who declined to be named because they were not authorized to speak publicly about the matter. When an agreement that gave Facebook exclusive negotiating rights expired, Google snatched up Waze for about $1 billion.

As for Snapchat, its compatibility with Facebook is unclear. Snapchat is centered on impermanence and offers privacy and anonymity. Facebook constantly pushes users to share more and is rooted in real-world identities and creating a permanent, largely public record of people’s daily lives and interactions.

Given these differences, the Snapchat bid looks like an attempt to corral back some of the cool factor in the form of young eyeballs. Three years ago, Snapchat did not even exist, and Facebook, with a valuation of $100 billion before its public offering, was the hot company. Now with younger users preferring Snapchat — which says it processes nearly as many photos as Facebook each day — Snapchat may well have the upper hand.

“It’s head-scratching,” said Christopher Poole, 25, the founder of 4chan, the message board. “From a business perspective, I understand it. But from a cultural perspective, it’s like, ‘Wait, what?’ ”

Mr. Poole said Facebook’s aggressive pursuit of Snapchat may point to an identity crisis of sorts.

“Does that mean that they’re willing to embrace an alternative to Facebook identity, or does it mean that they feel that threatened by it that they’d leave their own wheelhouse?”

A version of this article appears in print on November 18, 2013, on page B2 of the New York edition with the headline: Facebook, Still Dominant, Strives to Keep Cachet.


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