I co-founded a tiny little agency a few months ago called SocialOptimize that was focused on producing Facebook apps. At the time of founding, my partner and I received almost overwhelming demand from companies who were desperate to gain a presence on social networking site Facebook. Facebook was already quickly turning into a cultural phenomenon as everyone and their grandmother started registering for the site and “poking” each other.
Essentially, it was this mass of humanity in digital form that attracted advertisers and marketers to jump on the bandwagon and either buy ad space on Facebook or better yet, create “Facebook apps” that users could install on their personal pages. Early on, application developers found great success as the novelty of “Facebook apps” compelled millions of new Facebook users to add and share these apps with their friends. This network effect fed upon itself and created this great bubble of excitement around the “limitless” potential of Facebook.
Soon enough, the money men of the technology world, the venture capitalists, wanted to ride the coattails of Zuckerberg & Company. Venture firms like Bay Partners created Facebook-only funds to invest in startups that focused on building Facebook apps. Alas, the application ideas in the Facebook ecosystem and, for that matter, most of the social networking universe were not quality ideas and few investments have been made. Most of the Facebook apps out there are inane, simple apps, easily duplicated and without any clear path to revenue. Why would any sane venture capitalist invest in what I call a “secondary” strategy? Social networks have been great investments because they are the “platforms” with which all that valuable activity takes place. Social networks are what I call “primary” strategy investments. Social networking apps built for Facebook, Myspace, OpenSocial, Bebo, Orkut, or otherwise are “secondary” instruments and can rarely achieve any real value.
As a technology entrepreneur, I could have continued to make a good living off of naive companies that just “needed” to be on social networks because everyone else was establishing a presence. However, I knew that eventually, the novelty would wear off and “Facebook Fatigue” would set in. This fatigue will spread and we’ll soon have an epidemic of “Social Networking Fatigue.” Only a select few application development companies and social networks will survive the coming shakeup. Already, savvy corporations are looking at different approaches to social networking. So unlike the lemming-like companies that just “had to be” on Facebook who comprised the bulk of my client base, I will be leaving the party a little early. I did the best I can for those companies while the attention was still high, but you cannot fight the falling tide of interest, or rather the rising tide of disinterest and outright mutiny. The most rabid fanboys in this corner of the technology world will still hyperventilate about the “limitless” potential of social networking apps but they have never comprised the bulk of the marketplace.
This is by no means an unbalanced rant on Facebook and social networking in general. After all, I did make my livelihood here for a few hectic months. There is definitely great opportunity in social networking and media. I’m just voicing some skepticism based on a business perspective to balance out all the frothy excitement.
Here are a few posts from others who have slightly different takes and perspectives, who generally agree with me but are more eloquent:
Anita Hamilton – Suffering From Facebook Fatigue?
Jennifer Mattern – Top Ten Reasons Facebook Sucks
Om Malik – Why do we have Facebook Fatigue?
Dave Winer – Why Facebook Sucks
Chris Williams – ‘Facebook fatigue’ kicks in as people tire of social networks
Gopinath M – Advertising on Facebook Sucks!! – This is the one reason that will kill Facebook faster than any other reason. For that matter, advertisers and marketers are finding that their ROI on social network advertising in general has been less than acceptable. Only the smartest or luckiest entrepreneurs will be able to solve the ROI puzzle.
What would I do if I wore the big shiny shoes of a venture capitalist? I would ignore all the “secondary” application developers and “social app gurus” out there who dream about untold riches. There will almost never be an acquisition of a social networking app that would be sizable enough to move my needle. I would focus on funding social networks in emerging markets. “Primary platforms” will still earn rich valuations. Indeed the model works, but I don’t think that Myspace Mexico or Facebook Finland will find much traction. I would bet on the entrepreneurs in those countries building primary platforms from scratch who have an intimate feel for the cultures of their native countries.