Facebook, schmacebook

Did you read recently about Facebook’s popularity peaking (and therefore falling)? There’s a couple of good reasons for this, as I found out…

From a technology business point of view, I learnt a couple of nasty things about Facebook last week.

Like about 70 others I attended the Facebook Developers Garage in Melbourne a couple of weeks ago to see what was going on with Facebook. It is the American social networking phenomena that was launched in 2004 and now has over 64 milllion active users.

It allows anyone to write and connect up an application available to those users. Think being able to play Scrabble with your friends online. Facebook provides the environment and Scrabble is the application written by someone.

Sounds pretty sweet that you could tap into that large a customer base really easily. Additionally, if people use your application, you get a cut of the advertising action, and this is apparently making some developer people nice revenues simply riding on Facebook coat tails.

But here’s the rub:

Facebook is a set world. If you want to do something on Facebook, it is going to look like Facebook application. This means the Facebook font and a blue coloured environment.
The Facebook environment is changing regularly (apparently weekly), so this means you may have to be updating your application on a weekly basis.
Facebook isn’t going to tell you if your application will be killed by their changes, you have to monitor it yourself.

Therefore building a Facebook application isn’t like building up a website, in that you have to be constantly maintaining it at a technical level and you are really constrained in what you can do.

There were also some nasty commercial lessons learnt:

Most applications fail to attract users. A tiny installed base in the hundreds of users only is the norm, and this isn’t a critical mass.
Monetisation of applications, other than by getting a cut of the advertising, is extremely difficult to achieve, the “buy a virtual gift for $1” applications quickly run out of steam.
Marketing your application virally is the main way to get people to use your application and this is pretty difficult to achieve. With Facebook you are in a closed environment where thousands of other developers are competing to market their application virally.
The lesson appears to be that Facebook users of an application, don’t jump out of Facebook – that is, your Facebook-based users stay Facebook-based users.
The reason Facebook has opened up their system so that you can write your own application, is so that they can get more users, not the other way round. There is a reason they have 64 million users in three years, and was valued by Microsoft at $US15 billion.

Once again, it appears that there is no “magic button” solution for business.

Brendan Lewis is a serial technology entrepreneur having founded : Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club, Flinders Pacific and L2i Technology Advisory. He has set up businesses in for others in Romania, Indonesia and Vietnam. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.

To read more Brendan Lewis blogs, click here.

Comments

Chris Kettle at my247 writes: Even though I agree with most of what you’ve written (you are not restricted to using Facebook colour schemes, you can opt to control all your own formatting), as for “nasty commercial lessons learnt”, this made me laugh:

1. Most applications fail to attract users. A tiny installed base in the hundreds of users only is the norm, and this isn’t a critical mass.

Don’t be so naive. The marketing aspect is the same of a website, mobile site, podcast, magazine or blog. Just because you spent hours creating it doesn’t mean anyone will use it or read it – you either have to pay (advertising), use guerilla tactics or make it kick-ass so that people actually forward it.

2. Monetisation of applications, other than by getting a cut of the advertising, is extremely difficult to achieve, the “buy a virtual gift for $1” applications quickly run out of steam.

You don’t actually get a cut of Facebook advertising, you have to set up your own advertising network or advertisers – just like in the “real” online world. The talk of Facebook opening up a payment mechanism will make it much easier to receive payments than currently starting on the net, which is not that hard with your own PayPal app. Hardly Facebook’s fault.

3. Marketing your application virally is the main way to get people to use your application and this is pretty difficult to achieve. With Facebook you are in a closed environment where thousands of other developers are competing to market their application virally.

And how many million of websites do you compete with? At the moment the number of applications in certain areas is relatively low. How is it possible to compete virally with another competitor? If people like it / use it, they will forward – it’s much easier to grow virally on Facebook than online. Again if that’s what you’re preying on, then think again.

4. The lesson appears to be that Facebook users of an application, don’t jump out of Facebook – that is, your Facebook-based users stay Facebook-based users.

Well you have to give them a reason to move to your online site / mobile site? If people are getting bored of Facebook they may want to keep using your service online.

5. The reason Facebook has opened up their system so that you can write your own application, is so that they can get more users, not the other way round. There is a reason they have 64 million users in three years, and was valued by Microsoft at $US15 billion.

Yes – but they also present a very easy way for applications to go viral.

Happy days.

There is no such thing as a quick buck.

Ross Hill writes (and answers the above comment): Chris you have some good points, but while there are some good aspects of making a Facebook app I still think developing your own website is the best idea.

While it might be easier to grow to a million users on Facebook, they are a million users on Facebook – for example, if you want to email them, you can’t. You don’t have a lot of the flexibility that you would have if they had signed up to your own website.

Facebook is continually changing the rules and the latest profile revision that has been circulated shows apps are going to be given much less real estate on profiles and much less viral capability when it comes to invitations.