Facebook Charts the Course to 2025

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Strong third quarter earnings were posted by Facebook this week, but CEO Mark Zuckerberg set the stage for a year of investment ahead, with a ten year horizon. Facebook’s expenses are expected to grow between 50% and 70% next year, and the company looks set to not only aggressively scale its various app based technologies, but also recruit the best and brightest talent.

With almost 8400 employees, Facebook has grown 44% since last year. As CFO Dave Wehner explained:

… we’re investing where we think there is a great opportunity for long-term growth and that’s going to be really investing and continuing to grow the talent base of the Company. So, we’re investing in the people and that’s a big part of it.

On the user side, Facebook reports that over 1.35 billion people use the social network each month with 64% logging in daily.  On mobile – yes mobile – 703 million people login daily – signalling a massive 40% growth since last year.

Not content to simply keep pace, Facebook are pushing ahead with a substantial technology investment planned. The plan with 3, 5 and 10 year horizons is for Facebook to develop and grow multiple products to scale ahead of monetisation. On that agenda are WhatsApp, Messenger, Search, Video, NewsFeed, Oculus and Instagram.

Interestingly enough, for the majority of its social network users, Facebook is a single, broad product, with an abundance of features spooling kraken-like into our digital experiences. The push to hive off products across the social network platform (like the recently calved Messenger), however, signal a more strategic understanding of both the business opportunity and the audience behaviours.

With a core platform providing a consistency of experience, Facebook is well placed to aggressively invest in a next generation computing platform – based on augmented reality and Oculus. However, there are significant hurdles to overcome, even with a 10 year horizon. And that heavy investment will need to be focused around transforming the ungainly augmented reality hardware that limits the broad appeal of Oculus in order to avoid a fate similar to Google’s ill-conceived Glass.

Leaving that aside, Zuckerberg’s understanding of audience and scale and the commercial approach to technology and monetisation underpins both the investments and the product strategy. Turning his attention to Search and News Feed, he explained:

Some of the things like Search and some of these other products, this may sound a little ridiculous to say, but for us, products don’t really get that interesting to turn into businesses until they have about a 1 billion people using them. And so for Facebook, we’re there with News Feed and that’s why in the near term our priority is really around continuing to grow and serve that community and making sure that the business around News Feed and those mobile ads fully reach their potential. [my emphasis.]

Throwing these large numbers around seems trite until we break it down. Thinking through platforms at scale – with 1000 million people as a user base for several products at a time – means operating at a scale that few of us can imagine. In Zuckerberg’s own words:

But I do think that this is such a big opportunity ahead of us. I can’t think of that many other companies or products that have multiple lines of products that are on track to reach and connect 1 billion that have a clear path of how we can turn them into a business.

The path to 2025 has been laid out – and it looks like quite a journey ahead. But looking back to 2005 I could hardly imagine the 2015 we have in front of us. I’m guessing Facebook’s investors are consulting their psychics and calling on their resident futurists. And well they might, there’s certainly a lot at stake.

You can read the full transcript of the earnings call on SeekingAlpha.com.

More Waves of Digital Disruption: From DoubleClick to Twitter via Facebook

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FB-adcreation When DoubleClick launched their self-service advertising network it was a revelation. It provided marketers with a powerful sense of control over their advertising, its placement and spend. At the same time, it caused a level of disintermediation – with marketers taking on the media planning that was once the domain of agencies. Technology was, in effect, causing an in-sourcing within marketing departments – by providing the tools, techniques and education to succeed, DoubleClick was putting the power and knowledge in the hands of marketers who began to understand the intricate power and relationships between data, planning and budgets. DoubleClick represented a wave of digital disruption that we are still feeling today.

It was a no-brainer for Google to acquire DoubleClick in 2007 and roll its advertising network into its product line. And as they leveraged their massive advantage in search to bring additional context, targeting and data insights to bear, this advertising network became available (and useful) to smaller advertisers – to small business owners and startups – monetising the “long tail” of the internet and generating another wave of disruptive innovation in the marketing world.

And while Google has done wonders with its AdSense product, the DoubleClick heritage and its clunky user interface left it open to disruption. Into this gap stepped Facebook with its billion strong, socially connected audience, offering a slick, audience oriented interface.

With Facebook advertising, there was none of the legacy media planning/buying jargon or process dominating the interface. It was about creating very limited (or should I say “constrained”) styles of ad units and then targeting them by a range of data points – from the standard demographics (age, sex, location), to the more sophisticated  targeting of interests, connections and combinations thereof. Facebook took its cues from the disruptive trend that began with DoubleClick and pushed it further, generating a massive business in the process. Recent results showed that Facebook’s revenue rose 61% to $2.91 billion in the second quarter of 2014. This more than doubles Facebook’s profit year-on-year, up from $333 million to $791 million.

Recently, Facebook streamlined their ad creation process by following good user-experience design – focusing on the desired outcome rather than the process of advertising. By asking “what kind of results to you want for your adverts?”, Facebook were able to help novice advertisers improve their advertising. It didn’t require education or training. And it certainly did not require some certification. They used their knowledge, insight gleaned from the data generated by millions of ads and design expertise to help their advertisers make better ads.

Sure there is the more advanced ad building tools, but for many, this is good enough – and a vast improvement on the previous toolset.

And now, Twitter are also upping their game. I suspect they are hoping to disrupt the markets that DoubleClick created, Google grew and Facebook co-opted. Taking a similar approach to Facebook, Twitter now offer objective based campaigns – again, turning their big data to the advantage of their advertisers, customising workflows and creating niche outcomes like “app installs” or “leads”.

It’s an advertising product that is still being rolled out across Twitter’s global client base. It will be interesting to see how it performs when it starts being trialled by local Australian clients. But one thing is for certain – it won’t be the last wave of disruption in the digital marketing sphere. Learn more about the new Twitter offerings in the video below.

Coming Soon to a Google Ad -> You

Eye I. By Thomas Tolkien

A couple of years back, Facebook changed their terms of service that allowed your images to start appearing in contextual advertisements offered across the social network. More recently, they announced plans to remove a feature that allows people to prevent their names being found in search results. This means that those using Facebook can now be found by strangers (or by past friends, lovers, enemies) simply by using Facebook’s internal search tool.

Facebook explained that this feature was only being used by a small percentage of people. However, it’s a part of what seems to be an ongoing test-and-learn experiment about how much private information its 1.1 billion users are willing to share. Earlier this year, Facebook’s Graph Search revealed just how big “big data” can be – with over 500 terabytes of new data being produced each day. And based on their recent earnings announcements, that big data/privacy play is paying off – with revenue up 53% over the previous year.

And now, Google are following a similar path, tapping into all your reviews, recommendations and endorsements in their search results and advertisements. You probably noticed that Google provided a top of screen notification about changes to their terms of service a couple of days ago. If you waved it away without investigating, here is the section most relevant to you:

We want to give you – and your friends and connections – the most useful information. Recommendations from people you know can really help. So your friends, family and others may see your Profile name and photo, and content like the reviews you share or the ads you +1’d. This only happens when you take an action (things like +1’ing, commenting or following) – and the only people who see it are the people you’ve chosen to share that content with.

This new policy that comes into effect on 11 November 2013 will show shared endorsements on Google sites and on more than two million sites that use the Google display advertising network. What will this look like? In the sample image below from the Google Support blog, your friend’s recommendations/ratings appear in Google places, search results and ads.

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You can, however, opt out of this system, but there is a catch – you need to have a Google+ account.

Simply follow THIS LINK to Google Endorsements and uncheck the box and click the Save button.

This may well give Google+ membership a much needed shot in the arm. Or it may just increase the cynicism of the internet using public. But if the lessons from Facebook’s privacy test-and-learn approach is anything to go by, it will slip by largely unheeded and little understood – with Google claiming the benefits of your personal recommendations.

Eye I. By Thomas TolkienCreative Commons License Thomas Tolkien via Compfight

Instagram Dumps Early Adopters for a Shot at the Mainstream

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1344924671 When Instagram burst onto the scene with its mobile only platform and funky photo filters it came armed with a secret. It wasn’t just about the photos.

Sure, the vast range of photo filters were appealing. They provided a layer of nostalgia for the Gen Xers raised on Kodak round edged photos and soft focus pastels from the 70s. Some filters created a more edgy feel, displacing the photo border and accentuating the top end of the colour spectrum. They made the amateur photographer feel empowered, even if the filters sometimes degraded the photo quality. What we lost in quality we made up for in consistency of image, framing and in the ease of digital cropping.

Community was the secret sauce of Instagram

But Instagram was more than just a fun way to take photos. For many social network early adopters, it was a sanctuary from the noise of Facebook and Twitter. It allowed people to curate small communities of like minds, where networks of dozens, hundreds and in some cases, thousands, of people could share photos, tips and engage in in-the-moment sharing, collaboration and discussion.

And as the platform was engineered around mobility, it had built-in location awareness and sharing, so that closed networks of connections could create a sense of context around the digital interaction. Moreover, with push awareness, users could be updated on any interactions with their own images, comments, likes, loves and so on. It brought a human dimension to the digital experience. It was a sense of community and all the goodness that comes with that sense of belonging.

Facebook’s billion dollar acquisition changed the Instagram game

When Facebook purchased Instagram back in April 2012 for about $1 billion, it was only a matter of time before something changed. Facebook CEO, Mark Zuckerberg focused on synergies, announcing:

For years, we’ve focused on building the best experience for sharing photos with your friends and family … Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

But throughout 2012, Facebook has also been under pressure to prove its IPO valuation. And Instagram was a canny move, because it brings a ready made market.

Changing Instagram’s terms of use

Facebook are well-known for pushing the limits of user privacy. They started with the now failed Beacon. Then they stepped back and made a claim over all user generated content published on the social network. After a series of protests, Facebook modified their claims, but still succeeded in shifting the boundaries on user privacy and content ownership.

Taking a leaf out of the Facebook guide to user engagement, Instagram have now updated their terms of use which are due to come into effect on January 16, 2013. Buried within the Instagram site, these terms provide for the following “rights”:

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Saying goodbye to the early adopters, welcoming the mainstream

In making this move, Instagram is sounding its own death knell. It is signalling the end of the relationship to those who care about (and understand) the complex nature of web privacy. These “early adopters” were the founders of the Instagram community and fuelled its growth.

According to the diffusion of innovations, early adopters are vital in bringing new technology to the mainstream audience. Without the support of the early adopters, new innovations fall into the “chasm” and never reach wide acceptance within a community.

DiffusionOfInnovations

But the early adopters have done their job now and as Instagram says goodbye to them, it is opening its arms to the mainstream. The early adopters have bridged the chasm and are shifting their focus away from community building to monetisation.

Facebook’s lucrative double whammy

Facebook’s billion dollar investment has not only eliminated a competitor, it has opened a lucrative new revenue stream. Extending the existing Facebook photo sharing functionality (for which it was already a global leader) by integrating the Instagram capabilities will help drive further online usage.

The change in the terms of use will provide new revenue by allowing Instagram to license your photographs, name and images to content hungry third parties.

The shift from users to customers

Many have suggested that Instagram, as an alternative, should charge to download their app. But this would change the nature of the relationship. At present, Instagram has a strong community of “users”, but charging would make those users “customers” – and that in turn would compromise the business model.

As it currently stands, Instagram’s “customers” will be those “third parties” – brands and businesses who are interested in the vast quantities of content being produced by Instagram’s users.

Instagram may re-jig the terms of use with slightly more generous concessions based on user protest, but users should expect that the direction to be maintained.

So what happens to the early adopters?

They’ll move to a new service. They’ll rediscover Path or re-evaluate the new Flickr app. Perhaps they’ll warily move to the new mobile Twitter app with in-built filters.

But saying goodbye to the early adopters is not the end of the world. It’s the start of a new mainstream story. And many of us will only care when we see our own images splashed, out of context, in some other place on the web. But by then, that will be too late.

For many, privacy and “intellectual property rights” over our own image is happily traded for the benefits offered by social networks. But the choice is individual – and the challenge we all face is to be informed. And it’s bound to become more challenging in 2013.

What Facebook’s Year in Review Reveals About Us

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facebooktrendsAus The promise of big data is that it can reveal to us the truth in our behaviours, not just our beliefs.

Just think, for example, about your internet use over the last year. Or month. Or even week. What did you do? What sites did you visit? What did you click on? Why did you share a page or two, a link or a video? Now, imagine if we did the same thing for your friends – if we knew what they looked, liked and loved?

facebookstories2 And if we did the same with their friends, and their friends’ friends.

If we could overlay that in some way to create a visual tag cloud, we may just get a sense of what is important to our communities. We may garner some magical insight into what it is like to live in this rapidly changing world.

Well that’s what Facebook Stories is doing. Of course, it works best if you are a heavy Facebook user (I’m not), but it’s an interesting experiment that shows everything from your own personal timeline stories through to the trends that impacted us by country and by category.

But, for me, the most interesting thing that Facebook Stories reveals is where the pulse of our humanity lies. Take a look at some of the trends – you’ll see what I mean.

Facebook Bait and Switched My Life

Today is Quit Facebook Day – and I am in two minds. On the one hand, Facebook has been great, I have been able to easily connect to people all over the world, keeping in touch with their daily updates, their photos, the changes in their lives and the things they are reading, watching and thinking about. And it is not that I can’t do this in other ways, it’s that Facebook made it so easy for me (and for them).

But on the other hand, I have been a marketer and a technologist for over 20 years, and when I look at Facebook, I see a goldmine. I can see millions of people logging on, interacting, sharing their interests, their behaviours, their likes and dislikes not just with their “networks” but also with Facebook. And maybe even with Facebook’s partners. It is this latter form of sharing that concerns me.

The Age of unPrivacy

Anyone you speak with will have a view of privacy. Governments create legislation to enforce minimum standards on businesses, individuals join “do not call registers” to maintain some distance from brands and marketers and all the while, commentators announce the “death of privacy”.

Clearly as we shift more of our behaviour to the web, it becomes searchable – the great Google web spiders reaching out and collating the minutiae of our lives like the all-seeing eye of Sauron. If the Devil is in the details, then the scattered breadcrumbs of our online lives provide more than just a glimpse into our behaviours – they can be aggregated into patterns, codified and predicted.

This is even more pronounced in the walled garden of Facebook where our tastes and interests can be fed back to us – by Facebook ads, recommendations and suggestions. Take a look for yourself – create your own Facebook ad and you’ll see how minutely targeted your personal advertising campaign can be.

What Facebook are doing is pushing its members to allow ever more public access to our private information. It is doing so, not out of some grander view of the shifting nature of “privacy” as CEO Mark Zuckerberg would have us believe – there is real money to be made. As Chris Saad points out:

Most of Facebook's very mainstream users, however, still just want a private place to keep up with their friends and family. In short, the economic interests of the service are not in line with the interests of its users. Despite this, Facebook has been forced to smashed big cracks in its privacy blanket and started forcing its users, en mass, to adopt more transparent and public online personas.

Forrester analyst, Josh Bernoff suggests that Zuckerberg may well be right – that privacy isn’t a cultural norm anymore. But my view is that those active in their concern over these changes at Facebook are well ahead of the mainstream – that the issues presented won’t impact the early technology adopters in a significant way (after all, the Reclaim Privacy site has been doing a roaring trade for weeks). It’s the other 99% of Facebook’s 500 million members who are either confused by the changes, unaware of what the impact will be or simply don’t engage with these types of issues.

The Bait and Switch

At the end of Simon Mainwaring’s article on this subject he asks the question – “do you believe Facebook is to blame for a bait and switch?”. To that, I’d say yes. What was on offer has now materially changed.

For most of us, joining Facebook meant entering a social compact – we’d share the content, context and contacts of our lives – and we’d do so using Facebook’s social networking platform. We’d be able to control who had access to what we share and Facebook could monetize this in ways that worked in good faith. Accordingly, we (the public) joined en-masse. We tagged ourselves. We made Facebook the #1 photo sharing site on the web. We made it the largest social network in the world. And we helped it to transform from a bit player in the crowded social networking space to it’s leader.

Changing this compact now is difficult – and has not been communicated well. Rather than being transparent about their intentions, Facebook have opted to spin the changes, suggesting that the world has changed and that Facebook is moving to accommodate this.

As Bruce Nussbaum suggests, Facebook’s challenge is not to do with the purchase or products or services, but the exchange of value in what has become a cultural product.

Ownership in the social media world of networks is different from selling products and services in the traditional marketplace. Understanding the underlying cultural context of "free," "gift," and "creation" is important to businesses, including and perhaps especially high tech companies. It is not impossible to monetize that which is free. Apple did that with 99 cent songs on iTunes. But it is difficult.

I am always amazed to see that social networking sites such as Facebook (and to a lesser extent, Twitter) undervalue or misunderstand the importance of trust and transparency in the prosecution of their businesses. The TRUST that once existed between Facebook and at least some members of its user base has been seriously damaged in recent weeks – and the Quit Facebook Day is yet another milestone that will be marked.

So, Will You Delete Your Account?

I have a feeling that the Quit Facebook Day will come and go without a great deal of impact. At least initially. But for me, it is a turning point. It is the day on which Facebook reached its zenith – and from here the long, slow slide from prominence will begin. It happened with MySpace (which of course is still around). It happened with Friendster. And it will also happen with Facebook.

And now, I am off to delete my account. It will be replaced with a business account to manage aspects of my work – but the connections, the flavour and the personality will disappear. It’s time to find a new way to share.

Digital Citizens – Rethink Privacy

When we first join social networking sites such as Facebook, we enthusiastically create our profile, pouring personal data into fields, checkboxes and personal pages. We join “networks”, add “applications”, play “quizzes” and upload photos. What we may not realise is that with every click, every upload and every game/quiz interaction, we are contributing to a rich underlying “social graph” that maps our profiles – our likes, interests, locations and preferences. The most amazing thing is that we do this voluntarily.

If a telemarketer was to call you and ask you for these details, would you so readily hand them over?

Facebook’s Open Graph

Over the last couple of weeks there has been plenty of discussion around Facebook and the changes that they have made to the privacy settings. To me it felt like Facebook was Pulling a Swifty. The new Open Graph API clearly changes the game – by exposing your underlying data to affiliated websites who can then use this information to provide targeted information, goods, services (read advertising) straight into your browser/mobile device.

Some have proposed an exodus from Facebook on May 31. Matt Milan and Joseph Dee’s Quit Facebook Day is a rallying point for those who are not only disgruntled with Facebook’s lack of concern about user data/privacy, but are willing to act on it. As they say:

For us it comes down to two things: fair choices and best intentions. In our view, Facebook doesn't do a good job in either department. Facebook gives you choices about how to manage your data, but they aren't fair choices, and while the onus is on the individual to manage these choices, Facebook makes it damn difficult for the average user to understand or manage this. We also don't think Facebook has much respect for you or your data, especially in the context of the future.

Being a Digital Citizen and Diaspora

For me, this is the important point. Whether we like it or not, we are now “digital citizens”. We are active, engaged participants online – but citizenry has rights and obligations. The vast majority of us are not comfortable working through the 17 steps to improving our Facebook privacy. It’s complicated. But just because it is complicated and/or confusing, doesn’t mean that we choose to opt-in.

Danah Boyd in Facebook and Radical Transparency eloquently sums up the challenge and the frustration:

The key to addressing this problem is not to say “public or private?” but to ask how we can make certain people are 1) informed; 2) have the right to chose; and 3) are consenting without being deceived …

What pisses me off the most are the numbers of people who feel trapped. Not because they don’t have another choice. (Technically, they do.) But because they feel like they don’t. They have invested time, energy, resources, into building Facebook what it is. They don’t trust the service, are concerned about it, and are just hoping the problems will go away. It pains me how many people are living like ostriches. If we don’t look, it doesn’t exist, right?? This isn’t good for society.

A group of developers have seized on this opportunity to rethink community, personal data and ownership – and have announced their intention to create a privacy aware, personally controlled, distributed, open source social network. Called Diaspora, it promises much. Within days, the team have been able to use the Kickstarter website to raise over 1700% of their required project budget from more than 5000 individual sponsors.

Reclaim Your Privacy

But what EXACTLY is this data and what does it look like? Just check out the way Facebook handles “social advertising” – where YOUR photos and name can appear in advertisements targeting your friends. Have you adjusted the setting to say No one?

ReclaimPrivacy.org have created a neat button that will show you more precisely the data that you have open. Simply drag their Scan for Privacy button to the toolbar on your browser, login to Facebook and click the button.

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As you can see, I have a few settings myself that I need to change. In fact, I am going a step further – removing a whole range of personal data, photos, information and so on.

I am considering establishing a new, isolated personal account with links to a dedicated email address. I would use this to manage the pages that I am responsible for – but little else.

A Flash in the Pan?

You may ask yourself – so what. You may feel that there is a fair exchange between you and Facebook – that you get value and give away little. If so, then you are clearly one of the digital citizens who are operating with a greater level of knowledge.

But is this a flash in the pan? Will this small pocket of resistance dissipate?

The volatile nature of social networks means that businesses – large and small – can no longer put their head in the sand. A small issue can be amplified by even a handful of activists. Sure, there may only be a few thousand people indicating that they will be deleting their Facebook account … but how many millions are these people connected to? What is the network of their social graph? What is the potential impact of a wave forming and breaking over the Facebook wall?

Clearly Facebook head of public policy, Tim Saparani, realises where this may go. This article in Wired, announcing that Facebook is to launch simplistic privacy choices soon, signals some level of awareness.

The proposed changes are unlikely to reverse the company’s December decision to make large portions of a user’s profile into “publicly available information” — which means even if you hide the fact you support a gun rights organization in your profile settings, that’s still findable online.

Will it stop the exodus? Has it impacted our sense of trust in Facebook? And what does it mean for brands who are edging ever deeper into Facebook as a social engagement platform? Is this strategy putting brand investment at risk?

At this point it comes down to personal preference and personal awareness. Which way will you be leaning?