The hoodie, the phony hacker ethos, hijacking terms like 'keep shipping' for a business whose 'product' is posting grandma's photos of her trip to Branson, the chronic attempts to jam changes down the throats of users and, of course, the Mother of All IPOs that wasnt.
But the larger question is why it has proven to be so difficult to generate scalable profits from the @billion Facebook users.
The company is, in effect, the DEC - the Digital Equivalent of China. And that country has broken a lot of hearts and wallets with its alluring but hard to reach mass market. Recent studies may cast some light on the challenges that Facebook's leaders must confront, some of the most crucial of which have to due with culture and managerial experience.
Twitter, though smaller in terms of market cap and sales is about seven times smaller than Facebook. But it has already surpassed, in fact doubled FB in mobile revenue. That matters because in many places, like China and India and Brazil, the mobile phone is the computer. Not laptops, not tablets. Phones. But Twitter was born mobile. It's DNA is mobile and its managers' orientation, focus, experience and expectations are mobile. That gives it an advantage. Strategic thinking, new service development, market analysis are intuitively geared to that medium and its impact on those customers.
The Facebook team are no slouches. But they have to take that extra mili-second to convert from 17 inch screen think to 4 inch screen think. It's not as easy as it seems like it should be. Because it is not about shrinking, it is about re-imagining and re-engineering. And that requires time and resources, which gives nimble competitors an advantage, however slight.
There is lots of speculation about the 'cool' factor: celebrities tweet, grandmas like. Maybe. As recent history has taught us, those whims are ephemeral. We're talking about experience gleaned from the grand total of 7 or 8 years. Facebook may simply need to blow up its original model for attracting revenue and re-think its approach to its market. They dont like to be pushed, but FB has some authority with its community that it has yet to operationalize. And Twitter may well see its growth trajectory moderate. But if we live in an age where less is more - and is always on the move - it may personify the moment. JL
Eric Jackson comments in Forbes:
Facebook is currently worth $60 billion. The last venture round — pre-Facebook face plant — valued Twitter at $8.4 billion. Facebook’s trailing twelve months of revenue is $4.33 billion (which was less than Yahoo! (YHOO) over the same period for a little perspective). Twitter’s mobile-related 2012 revenue is expected to come in around $130 million according to eMarketer.
So, while Twitter isn’t “bigger” than Facebook from a market cap or revenue perspective — that might take another 4 years — it is already “bigger” in a couple of important ways. Twitter has always grown up in the shadow of Facebook (FB).
Facebook was started in 2004 in the dorms of Harvard. Twitter was started when Jack Dorsey sent an SMS message at 9:50pm PT on March 21, 2006.
Facebook got more early venture capital money. It saw bigger growth. It attracted more “mainstream tech” managerial talent like Owen Van Natta, Gideon Yu fresh off of selling YouTube to Google (GOOG), and Sheryl Sandberg to come in as COO. Facebook’s revenues have been bigger and faster in coming compared to Twitter. And, of course, Facebook IPO’ed last May, while conventional wisdom is that possibility is still a couple of years away for Twitter.
Twitter already has almost double the mobile revenue that Facebook has today, even though Facebook supposedly has 7x as many monthly average users. eMarketer says that Twitter will do $130 million in mobile ad revenues this year versus Facebook’s $70 million.
That matters because the world has gone mobile. That’s where users are and that’s where advertisers want to be.
Facebook defenders say that they have many more users than Twitter so, after they figure out how to make money in mobile, they should easily pass Twitter on that metric.
Yet, that’s besides the point. The real question is how did Twitter, with 7x fewer users than Facebook, so easily double Facebook on that important metric this year when both management teams equally saw the way the world was moving long before us mortal folks realized what was going on?
It’s simply because Facebook was born a big website company in its DNA and now has had to adjust on the fly to a world that has moved on to mobile.
Whether by dumb luck or crazy insightful genius (or a combination of both), Twitter started as a mobile company. It placed the 140 character limit on users from the start because of restrictions carriers put on lengths of SMS messages back in 2006. Therefore, its short messaging service has always worked really well on a mobile device while Facebook has always felt bulky and ill-sized for a mobile format.
So, when folks say that it’s just a matter of Facebook getting its act together, I think ‘yes, but what happens when Twitter also gets its act together and starts to have the same number of global users as Facebook with user count still increasing while Facebook’s is declining?’ Why won’t Twitter’s revenues dwarf Facebook’s then, even if Facebook finally figures out how to sell a mobile ad?
It’s not that I think Twitter’s head of sales, Adam Bain, is a more talented salesperson than Facebook’s Carolyn Everson. It’s just that I think it’s going to be easier and easier to sell a Model T versus a buggy-whip.
Advertisers will always want to corral users to go to their Facebook pages to keep that community within a walled garden the advertiser can study how they talk about their product. But, if the users don’t want to go there, they won’t go — and the advertisers will simply go where the users go and interact with them on their terms.
Twitter better suits the mobile–centric world we live in compared to Facebook.
I criticized CEO Dick Costolo for not pushing Twitter harder to make money. He didn’t think it was fair at the time and, in hindsight, I agree with him now seeing how the service has blossomed from both a product and revenue perspective in 2012.
But, aside from being bigger in mobile ads at the moment, the second way Twitter is “bigger” than Facebook is that it frankly is a “hotter” company right at the moment.
What do I mean by hotter?
As I said earlier, Yahoo! is a bigger company revenue-wise than Facebook. Yet the market judged in May that Facebook should be worth 5x as much as Yahoo! It was seen as a much hotter company because everyone believed that it was just getting started generating revenues and they would grow exponentially in the next 5 years.
But that would change.
By 2007 and after Mark Zuckerberg had backed off agreeing to be acquired by Yahoo! for $1 billion, Facebook was seen as the hottest social networking site.
They’d never look back.
Facebook kept growing like a weed – until last quarter. MySpace would see its users steadily decline.
We may be at Facebook’s MySpace moment right now.
I heard from a tech insider recently that Facebook’s page views were down 30% year-over-year in August. (I have yet to see any third-party confirm this, so take it with a grain of salt.) Thirty! Sure, you can say that the shift to mobile is hurting but that doesn’t explain 30% declines, if it’s correct!
When I hear 30% declines, I think about Fonzie jumping the shark.
I also think about people tuning out Facebook – even with the new iOS update that is faster but still jumbles up the temporal order of updates in my Newsfeed – and migrating to Twitter.
There’s another big advantage that Twitter has over Facebook — and Dick Costolo touched on this in a chat with Charlie Rose a couple of weeks ago. Facebook touts its “social graph” and how it knows so much about you from your college and who your friends are that you’re connected with. Yet, most of my Facebook friends are my high school friends. With all due respect to them, there was a reason I never got in touch with them for all those years before connecting with them on Facebook. I just don’t care about the party they went to over the weekend.
Twitter, by contrast, has something they call the “interest graph.” Who you follow on Twitter, and the kinds of topics you tweet about, potentially tells you much more about you for advertisers. That’s going to take a lot of artificial intelligence work but, seeing as Twitter’s finally retired the fail whale and will reportedly be offering its users the ability to search their tweets by end of this year, Twitter is going to have a much bigger treasure trove of data on you to help match to advertisers.
The “interest graph” is a much bigger deal going forward than the “social graph.”
The New York Times tech blogger Nick Bilton tweeted this afternoon:
“People start out addicted to Facebook, and then become fatigued. On Twitter, they start out fatigued, and then become addicted.
That’s my experience.
If we are truly at the inflection point where most of us think Twitter is cooler than Facebook and switch our usage habits accordingly, we’ll probably only know for sure 6 – 12 months from now.
My gut tells me though that Twitter has already passed Facebook in the “cool factor.”
And if we’ve learned anything from web services like MySpace and Flickr, as cool goes, so goes usage, revenues, and profits.
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