The New York Times ran an article over the weekend asking whether Facebook is a utility or not. While Facebook is fun, I don’t think that it’s important enough to qualify as a utility. But I do think that its low ratings on the American Customer Satisfaction Index suggest that Facebook is vulnerable, and does not have the power or lock-in that many believe that it does. Here’s why:

First, a quick recap of the article. Facebook signed up its 500 millionth active user last week, an impressive number for sure. At the same time it was cited as one of the least popular private sector companies in the US. These two seemingly contradictory facts sparked the comparison to a utility- something that you value and have to use, even if you don’t like the monopoly that provides it. Like danah boyd (one of the smartest social computing experts I’ve met) I don’t like my utility companies very much. And like many Facebook users, I’m not wild about the company, with it’s continual shifting of service terms and its tendency to be on the wrong side of privacy (public unless you opt out, rather than private unless you make public).

Many believe that Facebook is so ubiquitous that its destined for dominance, and it’s clear that Mark Zuckerberg has ambitious plans to become integral to the Internet. But myspace looked pretty dominant for a while too, and look what happened. People migrated to Facebook because it was much easier to use, and it emphasized user experience over advertising revenue. Myspace was painful to use, and advertising got in the way of pretty much anything that you tried to do.(Much like trying to watch the Olympics on NBC.) Facebook understood that, and designed a much stronger alternative. (By the way, I still have three accounts in limbo on myspace, as do many other people I know.)

I still think Facebook is vulnerable, for several reasons:
Lack of a strong brand. I don’t know what Facebook stands for, and I don’t trust it. Shifting service terms, wriggling on privacy, and the looming temptation to monetize all that data make me worry that I’m much more the sum of my data than a customer that Facebook cares about. So far Facebook hasn’t done anything really bad with my data (that I know of) but they clearly don’t think about my privacy the way that I wish they would. Facebook has a huge opportunity to build a brand that people trust.

How to manage all those friends. Google usability researcher Paul Adams has an outstanding presentation on the “Real LIfe Social Network” that shows why Facebook’s friends model breaks down in real life. The argument is simple: in real life people tend to have 4-6 different social networks comprised of less than 10 people. While some people cross networks, generally the networks have different things in common, and different interests, so most people manage them separately. I constantly worry that someone from one of my networks may make a comment that is perfectly kosher in one network, that might be taken out of context by another, creating offense. I want to manage my different social networks differently, yet Facebook insists that they all have to mash together. I’m forced to manage this pretty crudely, by ignoring friends requests or unfriending people, sending messages of rejection that I do not intend, because I enjoy these folks in other contexts. I’m told that it’s possible to create subgroups, but this is not easy or intuitive to do.

With low customer satisfaction, Facebook is vulnerable to the next great idea, the next social networking tool that provides a better, more unique experience that allows people to manage their social networks much like they do in the real world, with subtlety and nuance. Facebook has the incumbent’s advantage, and the power and resources to make some needed changes, so it may continue to dominate. But I don’t think Facebook dominance is a given by any means.

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  • Michael D Watson

    I came across your blog post and was instantly drawn to it. My friends and I have been having a similar discussion on and off over the past couple of weeks. I read the article by Joshua Brustein of the New York Times and then looked at your question about whether Facebook is a utility or not. I feel that in this scenario the online social network is the utility and Facebook is only the provider. Instead of asking:

    Facebook ⊆ Utility ?

    We should change the question:

    Virtual Social Network ⊆ Utility ?

    When we change the question to, “are Virtual Social Networks a utility?” it becomes exceedingly difficult to refute. Although I cringe at referring to Wikipedia, their Social Networks page highlights the pervasive international usage of virtual social networks. When demand for a commodity or service becomes ubiquitous it takes on utility status. There are over 200 million users of Chinese Qzone, 81. 5 million users on Russian Vkontakte, and over 20 million users of the Japanese Mixi. When these sites are combined with 500 million users of FB, the widespread global demand for virtual social networks begins to look a lot like a utility.

    Is Facebook Vulnerable?

    This is a pretty exciting question and I appreciate your citation of Paul Adam’s presentation. I read through all 200+ slides and he does a fantastic job pinpointing the short-comings of how we manage our networks on FB. Although I would agree that it is extremely susceptible to competition, I prefer to properly address some of its strong suits first.

    I. Global in Scope/ Strong Market Penetration

    Starting in 2008 I spent a year studying in Beijing. Every morning I was in a classroom with 18 different people from 15 different countries. Other than the two North Koreans in the class, every single person had Facebook. The students from Mongolia, Spain, Germany, Ecuador, USA, Canada, Burundi, Ghana, Thailand, South Korea, UK etc all had Facebook. FB was no longer useful but necessary. The site’s comprehensive network of users makes it ideal for anyone entering a new social environment. That new social environment could be a school, job, city, or country.

    II. Structure

    One of the initial appeals of FB vs. MySpace was that FB provided me structure. It clearly laid out the format of my page as well as those of my friends. I quickly knew what to expect when navigating through my network and manipulating the site. On the other hand, MySpace allowed for an immense amount of personalization making it increasingly unorganized and disconnected. For me and many other users, Facebook and MySpace were the first integrated virtual social networks that we joined. The structure provided a proper way of becoming accustomed to the new technology. In my opinion, this is one of FB’s greatest accomplishments; however, will we always need or want this structure?
    Shortcomings

    The first weakness you gave for FB was the “Lack of a strong brand.” I found it fascinating how you intertwined this with privacy issues. As Paul Adams pointed out, Privacy = Trust; however, Facebook is doing very little to market itself as a company that takes privacy seriously. If privacy remains a concern for Facebook’s users, and if an increasing number of users consider it an untrustworthy network; then FB users will find it increasingly easier to switch to something new. With a lack of trust and low ratings from the American Customer Satisfaction Index, it seems like a perfect scenario for new companies to fill this void. As you said, you switched from MySpace to Facebook without much friction. Why can’t it happen again?

    There is an interesting startup social networking site named Diaspora. Last May, four NYU students started creating a networking site similar to FB with the exception that nothing will be stored on Diaspora’s servers. Opposed to using a centralized hub like FB where user’s relinquish their rights to data and content, Diaspora allows users to upload content to any server they want and retain the rights to their content and privacy. The site will also create a vein in the WordPress servers for easy uploads for non-tech users. In addition, the source code will be open. Within 3 months, over $200,000 in capital was pledged to the four college students. When capital is provided that easily, it is often an indication that change is on the horizon.

    I am also concerned with how younger users are initiated into the FB network. I had a conversation with my sixth grade niece about how many of her friends used FB. She told me that many of them did; however, several of her friends’ parents (including her own) would not let their kids join. Her parents had two concerns:

    1. She would instantly be exposed to an enormous network where they could not protect her.
    2. She was not aware of how important her privacy was and could easily post too much information.

    This is going to be an interesting battle in many families over when and how kids should join FB. Protective parents respect privacy the most. If they find another site that takes privacy more seriously, then they may be more willing to start their children at a social network site other than FB.

    I could probably go on and on about FB, but I realize I have written a lot already. Facebook is just another provider of a utility not a utility itself. With strong negative sentiment for a bourgeoning technology there is a brewing pot for new companies to come in and sweep users off their feet. I do know that once the Facebook movie comes out in a couple of months, a lot of people will be talking.

    (I apologize for the lack of links to my comments, but the post did not allow me to link and I did now want to muddle the post with site addresses)

    • Lee Shupp

      Thanks, Michael, for very thoughtful comments. Appreciate the post! To continue the conversation:

      In considering whether Facebook is a utility or not, Michael expands the question to ask if all social networks act much like utilities. I agree with him that they do; much like the phone network, social networks allow us to communicate and interact with others in a way that most of us feel is indispensible to modern life. That comes with some baggage however; most utilities are disliked precisely because of our dependence on them. We have done some thinking on “Products People Love” to uncover the design elements that create strong consumer passion for products, and one of the elements is choice. We choose the products and services that we love, and resent arranged marriages. This helps to explain why energy companies, cable companies and telephone companies struggle to win our affection. It also helps to explain why Facebook’s increasing dominance makes it harder to inspire customer passion.

      Moving to the question of whether Facebook is vulnerable or not, I believe that when you have a dissatisfied user base, no matter how large, you are vulnerable to competition. Unhappy customers are just waiting for an excuse to leave you. All they need is a more alluring customer experience to tempt them. While Facebook is global in scope, with high market penetration and the benefits of the network effect, there are several reasons why this does not guarantee future success.

      First, there is no technology lock-in. There is no technological reason that people can switch to another social network. Facebook is trying very hard to achieve lock- in by integrating with the rest of the web as quickly as possible, and becoming a “platform” on the Web. While there have been early successes, there is also strong resistance as other players fear the rising power of Facebook, and quietly resist or actively counter. There are rumors of a coming Google plaly into social networking, and that would be a sensible strategic move on their part. (Let’s just hope that it’s better thought out than Google Wave.)

      Second, and related to the issue of lock-in, users don’t have to pick one social network over another one. You can belong to as many as you want, and increase or decrease your usage as they evolve to be more or less relevant to your needs. I belong to multiple social networks, and use them to filter how I relate to people, and how I separate social groups, since this is so hard to do on Facebook. I use Linked In and a Twitter account for my business communication and business networking. I use Facebook, mySpace, FourSquare, Yelp and another Twitter account for personal relationships. So rather than choosing one primary network that fulfills all my needs, I balance many networks and shift my usage as my needs and social networks ability to best meet my needs evolve over time.

      Last, the cost of entry into the category is relatively low. You just need a great idea, astute design, computer programming chops and some venture capital to start a new social network. There are many new social network startups in Silicon Valley, each with a strategy to topple Facebook and become the Next Big Thing. Only a fraction will survive, and it remains to be seen whether or not one of them has the right mix of user appeal, innovative edge, and business model to win, but the game is definitely still on, with the ultimate winner still to be decided. Michael cites Diaspora, a startup with the very different attitude towards privacy, as a great example. Yes, Facebook has a very big lead, but with dissatisfied customers and growing competition, I believe that they are vulnearable.