Growth and revenue might be competing factors for Facebook

Engage in conversation long enough with someone in the communications industry, and talk will inevitably turn to Facebook's redesign.

Engage in conversation long enough with someone in the communications industry, and talk will inevitably turn to Facebook's redesign.

While anyone can bicker about aesthetics, the interesting debate that has begun to permeate those same circles is what Facebook owes its community and whether it could (or should) possibly run its company based on the objections of its loudest critics. When Facebook recently attempted to change its terms of service (TOS) to allow for more ownership of the user-generated content that's on the site, the crowd rebelled, and many believe Facebook overreacted by creating a “Bill of Rights” that promises to better heed some of the site's users' wishes.

It's important to acknowledge that Facebook and other social media sites have to more carefully gauge their customers' sentiment than traditional companies. Your individual enjoyment of a Snickers bar, for example, does not depend on whether your friend eats the candy bar. If 100,000 fewer people eat Snickers this year, it won't affect your own utility. But the depletion of users at a social network turns into an exponentially decreasing utility of individual members. If your friend leaves, it negatively impacts your experience.

There is no obvious solution to how Facebook alters its strategy to maximize revenues while retaining users. But some influential people are trying to figure it out.

FastCompany.TV MD Robert Scoble put up a helpful timeline that described the multiple phases of Facebook. Those complaining about the design changes are stuck admiring the phase before business (i.e., revenue) entered the picture. Those people might never accept any Facebook iteration beyond that point. If it wants to bend to its whims, Facebook will retain its nearly 200 million users, but fall out of business when funding runs dry.

Slate's resident Facebook columnist, Farhad Manjoo, has tackled Facebook's dilemma in multiple columns, one which suggested that those whining about design changes are bluffing.

There are two major reasons why Facebook is sensitive to user criticism: 1) Friendster and 2) the irrationality of the human condition. Friendster, the Mayan civilization of social networks, lost a lot of users when it introduced a feature that let users know what other users looked at in their profile. And then others, including myself, decided to switch to MySpace. I can't remember exactly why, other than the reason that everyone else was defecting. But why was everyone leaving?

To that point, Facebook is probably afraid of its own mass defection. It could happen because of the TOS, the design, or something seemingly innocuous. That's why Facebook always needs to course-correct. There are two areas of importance for Facebook: user growth and revenue. The sweet spot of that Venn diagram might very well be to ignore those users who complain.

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