Facebook is a social network. Being social, it is subject to the same laws of attraction, affection, excitement, and coolness that the hot new restaurant, dance club, and sports stadium are in your particular city.
Step 1: the cool kids spot a new place and start hanging out there.
Step 2: the first signs of the popped collared masses show up, pushing the cool kids out as they realized the lame-streamers have spotted the new venue.
Step 3: the masses start reviewing the venue on Yelp and in local hipster papers claiming it is the hot new spot.
Step 4: the suburbanites located a 30 minute drive from the venue (without traffic) read these reviews and start frequenting the venue, causing long line-ups outside.
Step 5: the masses proclaim the venue to be uncool and/or played out and move on to the next best thing.
Step 6: the venue becomes filled with 30 and 40 something divorcées who are trying to be cool and crossing their fingers that they win the lottery so they can avoid having to do the whole Match.com and eHarmony thing.
Step 7: the neighbourhood that the venue is in becomes fully gentrified and the venue is sold to some entrepreneur who wants to make it into a Starbucks or fake Irish pub.
Facebook's history follows this same pattern:
Step 1 (2004-2005): The place for cool university kids.
Step 2 (2006-2007): The 20 somethings show up and proclaim how awesome this new phenomenon is. Not to be out-done, they claim ownership to the new network, and get their friends to start checking it out every so often instead of MySpace.
Step 3 (2007): The young professionals show up and start discovering that their old high school sweethearts grew fat, old, and unhappy. They revel in the spectacle. The cool university kids start complaining that the place was better when it was just Stanford, Harvard, et al.
Step 4 (2008-2009): Your mom, dad, uncles, and aunts show up to the show. With every Like from their mom, 20 and 30-somethings start cringing and trying to figure out how they can lock down their privacy settings. Word starts leaking out about how the cool kids are now using something called Twitter.
Step 5 (2010): The first murmurings about it being cool to not be on Facebook are actually taken seriously as every 50 year old and their day job at some boring Fortune 500 company setup shop with a Facebook Group and a QR code advertisement. "Quit Facebook Day" becomes a movement. The cool kids, having adopted Twitter en masse, now start being over-run by the 20 and 30 something professionals who are desperate to find their new fix.
Step 6 (2011): With most actual action happening on Twitter, Facebook is relegated to the social networking equivalent of having brunch with your friends. It's no longer the cool party spot. It's just a place you go to brag about that other cool thing you were up to the night before.
Step 7 (2012): Facebook announces its IPO and officially becomes the Hotmail of Web 2.0.
Has step 6 happened already? I have a hard time figuring it out since I was part of step 2 and haven't seen all the cool kids that were there in 2006 leaving for Twitter...
I believe you could apply the same logic to almost everything but Google is still the cool kid after all these years as is Manchester United, right?
Until now, Google has not had to care about the coolness factor. They weren't in the social space. Now that they are, just look at how Google+ has fizzled. They pulled the worst stunt you possibly could have pulled when you're trying to be cool: hold a line-up outside your club only to have people come in and find out nobody is inside and the party sucks.
Step 6 has definitely already happened. Remember what is cool is not necessarily what is popular. Cool is the derivative of popularity though. At any given time, if you want to find out what will become popular later on, just find out what's cool. Twitter has 106 M users vs Facebook's 500 M as of 2010. It's clearly not as popular as Facebook. But Twitter's growth has been faster (and more sustainable than Google+'s initial exponential growth) than Facebook's was. The trend is keeping up and as much as we can laugh and joke about the utility of Twitter, I'd say that it is already at Step 4. You already are finding people that want to move onto something else that's cool (which IMHO is what drove the initial adoption of Google+).
We can relearn all of these lessons or we can just admit that we're really doing social businesses and these sort of things have been around for a long time. How they work is well known. Just, up until this past decade or so, we'd never seen them in the technology space.
Sports stadiums are never profitable. Tax payers in the municipalities where the stadiums are built pick up the losses in almost all cases, either during construction or when the team decides to just leave and holds them ransom for a new one.
2/3 of restaurants fail outright soon after opening. The other 1/3 tend to be profitable really quickly (running a restaurant is tough and you can't run it at a loss for very long). You'll see successful restaurant owners start another one within a few years, because the old one is starting to get stale to people. Besides, around that time usually the star chef decides to move onto something better too.
Dance clubs fall into a couple of categories IMHO. You have the smaller spots, which can and do thrive. They hold about a 100 or fewer people, are often started by one really savvy entrepreneur who just wanted to create a cool spot (sound familiar to hackers and OSS? :-P). Then you have the bigger spots. These are cavernous mega clubs, and in my experience they're often in one way or another linked to organized crime and/or money laundering. They'll garner a lot of attention through PR, celebrity sightings, and marketing, and eventually implode under a pile of debt. How you can pile up debt selling alcohol at $7 a shot and several hundred dollars a bottle, I'm not quite sure. Read about Peter Gatien, one of the more notorious club owners in North America. Jay-Z has rapped about him: "Me and my operation, running New York nightscene, with one eye closed, like Peter Gatien". The whole business is about shifting debt like a hot potato. It's disgusting.
Social businesses have a finite amount of time with which they are fashionable to the masses and under which their growth is distorted. That first explosive growth trend never repeats itself ever again, which is probably what Facebook is trying to contend with right now as it decides when to go public.
If I were Mark Zuckerberg... I'm clearly not anywhere as brilliant as he is... but if I were in his shoes, I'd take a page from other successful social entrepreneurs. Start something new that's cool and is not Facebook-branded. The trick to social businesses is that the entrepreneur should be the brand. Facebook should be a Zuckerberg product in the same way that 69 Royal Hospital Road is but a single Gordon Ramsay restaurant. Zuck should have a portfolio of social sites, not one fucking behemoth that, when it fails, takes him down with it.
Good analysis, but when did Twitter take over? Of the people that I joined Facebook to interact with, maybe 5% have a Twitter account and a minority of them actually use it.
Step 1: the cool kids spot a new place and start hanging out there.
Step 2: the first signs of the popped collared masses show up, pushing the cool kids out as they realized the lame-streamers have spotted the new venue.
Step 3: the masses start reviewing the venue on Yelp and in local hipster papers claiming it is the hot new spot.
Step 4: the suburbanites located a 30 minute drive from the venue (without traffic) read these reviews and start frequenting the venue, causing long line-ups outside.
Step 5: the masses proclaim the venue to be uncool and/or played out and move on to the next best thing.
Step 6: the venue becomes filled with 30 and 40 something divorcées who are trying to be cool and crossing their fingers that they win the lottery so they can avoid having to do the whole Match.com and eHarmony thing.
Step 7: the neighbourhood that the venue is in becomes fully gentrified and the venue is sold to some entrepreneur who wants to make it into a Starbucks or fake Irish pub.
Facebook's history follows this same pattern:
Step 1 (2004-2005): The place for cool university kids.
Step 2 (2006-2007): The 20 somethings show up and proclaim how awesome this new phenomenon is. Not to be out-done, they claim ownership to the new network, and get their friends to start checking it out every so often instead of MySpace.
Step 3 (2007): The young professionals show up and start discovering that their old high school sweethearts grew fat, old, and unhappy. They revel in the spectacle. The cool university kids start complaining that the place was better when it was just Stanford, Harvard, et al.
Step 4 (2008-2009): Your mom, dad, uncles, and aunts show up to the show. With every Like from their mom, 20 and 30-somethings start cringing and trying to figure out how they can lock down their privacy settings. Word starts leaking out about how the cool kids are now using something called Twitter.
Step 5 (2010): The first murmurings about it being cool to not be on Facebook are actually taken seriously as every 50 year old and their day job at some boring Fortune 500 company setup shop with a Facebook Group and a QR code advertisement. "Quit Facebook Day" becomes a movement. The cool kids, having adopted Twitter en masse, now start being over-run by the 20 and 30 something professionals who are desperate to find their new fix.
Step 6 (2011): With most actual action happening on Twitter, Facebook is relegated to the social networking equivalent of having brunch with your friends. It's no longer the cool party spot. It's just a place you go to brag about that other cool thing you were up to the night before.
Step 7 (2012): Facebook announces its IPO and officially becomes the Hotmail of Web 2.0.