Network Effects and the Decline of Facebook

Let me start with a story. You have a friend, let's call him Paul, who used to work for a big shot consultancy. A few years ago, the consultancy was undergoing a periodic cost-cutting exercise; Paul happened to be on the bench and was let go. He didn't immediately find another full-time job, but he found a series of short-term contracts to pay the bills until something else turned up. And of course he changed his profile on Linked-In.

Three years later, he's still in the same position. You receive a notification from Linked-In, asking if you would like to congratulate Paul on the anniversary of his losing his job. Doesn't really seem appropriate, does it?

One of the problems of social networks is maintaining a reasonably signal-to-noise ratio. When most of the notifications on Linked-In are to tell you that someone you barely remember is attending some random event, it's tempting to switch off notifications altogether.

And Facebook notifications can be even more annoying. Many years ago, Bill Gates quit Facebook because of the volume of friend requests he was receiving. Taylor Buley cites this as an illustration of Beckstrom's Law. 

The best-known model of network effects is Metcalfe's Law, which states that the value of a network is proportional to the square of the number of users. Beckstrom's Law is a more advanced model, and includes the net value of the transactions on the network. Thus subtracting the aggregated costs of belonging to the network, including all those bothersome requests and notifications.

This week, the Facebook shareprice crashed. In his analysis of this event, John Naughton suggests that the value of Facebook depends not on the absolute number of users, but in the rate of change, and this is what explains Mark Zuckerberg's obsession with growth (as shown in Ben Grosser's montage "Order of Magnitude"). If user numbers start to decline, then the virtuous circle suddenly turns vicious, leading to a downward spiral.

What is also clear from this event is the extent to which Facebook's commercial success is dependent on other players in the ecosystem. Access to Facebook services is almost entirely channelled through devices running software from three other tech giants - Apple, Google and Microsoft.

And with Microsoft's recent acquisition of Activision Blizzard, we may expect more shifts in the balance of power between them. According to Microsoft's announcement (18 January 2022)

This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.

 

Your move I think, Zuck.

 

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Dina Bass, Five Reasons Microsoft Is Making Activision Blizzard Its Biggest Deal Ever (Bloomberg,18 January 2022)

Taylor Buley, How To Value Your Networks (Forbes, 31 July 2009) 

Michael Hiltzik, Is this the beginning of Facebook’s downfall? (LA Times, 4 February 2022)

Natasha Lomas (@riptari), On Meta’s regulatory headwinds and adtech’s privacy reckoning (TechCrunch, 4 February 2022)

John Naughton, For the first time in its history, Facebook is in decline. Has the tech giant begun to crumble? (The Guardian, 6 February 2022)

Wikipedia: Beckstrom's Law, Metcalfe's Law

Related posts: What makes a platform open or closed? (May 2012), Making the World more Open and Connected (March 2018), Metrication and Demetrication (August 2021)

Making the World More Open and Connected

Last year, Facebook changed its mission statement, from "Making The World More Open And Connected" to "Bringing The World Closer Together".

As I said in September 2005, interoperability is not just a technical question but a sociotechnical question (involving people, processes and organizations). (Some of us were writing about "open and connected" before Facebook existed.) But geeks often start with the technical interface, or what is sometimes called an API.

For many years, Facebook had an API that allowed developers to snoop on friends' data: this was shut down in April 2015. As Constine reported at the time, this was not just because the API was "kind of shady" but also to "deny developers the ability to build apps ... that could compete with Facebook’s own products". Sandy Paralikas (himself a former Facebook executive) made a similar point (as reported by Paul Lewis): Facebook executives were nervous about the commercial value of data being passed to other companies, and worried that the large app developers could be building their own social graphs.

In other words, the decision was not motivated by concern for user privacy but by the preservation of Facebook's hegemony.

When Tim Berners-Lee first talked about the Giant Global Graph in 2007, it seemed such a good idea. When Facebook launched the Open Graph in 2010, this was billed as "a taste of the future where everything can be more personalized". Like!

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Philip Boxer and Richard Veryard, Taking Governance to the Edge (Microsoft Architecture Journal, August 2006)

Josh Constine, Facebook Is Shutting Down Its API For Giving Your Friends’ Data To Apps (TechCrunch, 28 April 2015)

Josh Constine and Frederic Lardinois, Everything Facebook Launched At f8 And Why (TechCrunch, 2 May 2014)

John Lanchester, You Are the Product (London Review of Books, 17 August 2017)

Paul Lewis, 'Utterly horrifying': ex-Facebook insider says covert data harvesting was routine (Guardian, 20 March 2018)

Caroline McCarthy, Facebook F8: One graph to rule them all (CNet, 21 April 2010)

Sandy Parakilas, We Can’t Trust Facebook to Regulate Itself (New York Times, 19 November 2017)

Wikipedia: Giant Global Graph, Open API,


Related Posts SOA Stupidity (September 2005), Social Networking as Reuse (November 2007), Security is Downstream from Strategy (March 2018), Connectivity Hunger (June 2018)

Content or Platform?

Yesterday I was talking to a guy from a large media company about its social media strategy. The company is already successfully using social media for distributing and sharing content with its customers, but it doesn't have as much corporate presence as it might like. How might we use social media to talk about ourselves, to let people know about, say, job vacancies or our corporate ethics, he asked.

A media company is judged by its customers according to the range and quality of the content it provides - the company essentially provides a platform for this content. But how do you talk about the platform without interfering with the content? Will customers be turned off if we use the platform to talk about the platform?

At one extreme, there will be customers who really don't want to know about the platform at all. @dgwbirch tweets "I don't want to be friends with my bank, I want to be friends with my bank account. I want to follow my credit card, not my issuer".

But at the other extreme, there will be customers who may value other kinds of interaction. For example, a media company is always swamped with requests from young people for internships and work experience, and we can only grant a limited number of these requests. But suppose we could use social media to give a much larger number of young people the opportunity to develop some skills and show what they are capable of, provide them with decent feedback, and allow them to earn some token of experience that they could mention on their CVs.

Note how an innovative approach to strategy (in this case social media strategy) is driven by a quest - looking for different and innovative ways of creating direct and indirect value within our ecosystem. The widespread success of social media depends significantly on the fact that people are motivated by all sorts of things other than money.

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When I was a teenager, I entered a DJ competition, for which I had to nominate three singles. I chose one current hit, one old hit, and one new release. I failed to win the competition, and I guessed that my choice had been too obscure for the mainstream. The new release I had chosen was a folksy cover version of a song by Joni Mitchell; several months later, it started to get some airplay and shot to number one. I'm sure there's a lesson there somewhere.

An Architectural History of Social Networking

@ruskin147 is in California to meet the networking pioneers, including Stewart Brand.

In 1985, Stewart Brand was one of the founders of an online community called the Well. As Rory reports, the Well provided "inspiring stories of the power of online communication, as its members used its forums to share their lives, their thoughts, and their passions - whether it be for obscure technology questions or discussions about the meaning of life".

In 1994, Brand wrote a brilliant and controversial book about architecture, How Buildings Change, which among other things contained a theory about evolutionary change in complex systems based on earlier work by the architect Frank Duffy and the ecologist Robert O'Neill. The theory was then known as Shearing Layers; Brand now prefers to call it Pace Layering. If there is a difference between the two, Shearing Layers is primarily a descriptive theory about how change happens in complex systems, while Pace Layering is primarily an architectural principle for the design of resilient systems of systems.

In the original Shearing Layers theory, the slowest-moving layer is known as Site. In the context of physical buildings, this is the geographical setting, the urban location, and the legally defined lot, whose boundaries and context outlast generations of ephemeral buildings [via Wikipedia].

An interesting question for Brand then is whether social networking continues to occupy the same "Site" as early initiatives such as the Well. In other words, the boundaries and context outlasting generations of ephemeral technology.

Brand told Rory that he saw some of the same principles in Facebook that had governed The Well: "I'm really impressed at a lot of the instincts that Zuckerberg has had. Taking non-anonymity as an absolutely fundamental value of his company and thereby beating off the competition. A Facebook identity is one of the most valuable things his company offers. The lack of anonymity is what gives it value." [Friendster, Facebook and the Well]

But that's not quite the same as asserting a historical path from the Well to the present day. The critical question here is not how aware Zuckerberg and his associates were with the history of social networking, but to what extent this history directly or indirectly influenced their actions and choices. For example, our collective understanding of "anonymity" is coloured by the past couple of decades of internet and pre-internet activity. Zadie Smith (a near contemporary of Zuckerberg at Harvard) talks about Zuckerberg's idea about what a person is, or should be, and worries that her own idea of personhood is nostalgic, irrational, inaccurate [New York Review, 25 Nov 2010]. And of course ironic.

Where exactly did Zuckerberg's idea of personhood come from? There may be a sense in which echoes of the Well may persist in Facebook through the way such concepts are understood and managed. And although we wouldn't necessarily take Brand's opinion of this at face value (or for that matter Zuckerberg's) there can be few people whose opinion would be so interesting and well-informed.

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See also

Roger Hudson, The Evolving Web - A Pace Layering view of the development of the Web and the W3C (March 2008)

Howard Silverman, Panarchy and Pace in the Big Back Loop (originally published on People and Place, March 2009, republished on Solving for Pattern, Oct 2012)

Matt Webb et al, Twitter thread discussing the provenance of the Shearing Layers concept (April 2021)

I have written several other posts on this blog discussing various aspects and applications of pacelayering.

Links updated 11 January 2018, 23 April 2021. Inserted reference to O'Neill.

Organizational Memory

Are social networking tools the solution to improving organizational memory (asks @EffectiveCIO Chuck Musciano)? Chuck's blog Legs and Memory suggests a link between memory and efficiency: "Forgotten items create more work, both at home and on the job."

Now that would be easy enough if nothing ever changed, and if last year's best practices still worked. But as Chuck points out, formal guides and detailed documentation fail because of continuous change. There is a tension between efficient adaptation and effective adaptability.

So Chuck argues that organizational memory is best retained in the heads of the people in the organization. And because captured organizational memories fade rapidly over time, you must reinforce your organizational memories, by constantly revisiting and updating them.

What's the role of social networking tools here then? Chuck doesn't believe that these tools are yet up to the job of real-time knowledge capture, and falls back on the old favourite - finding the person who knows what we need. Better than nothing perhaps, but way short of what is needed.

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What is needed for organizational intelligence is the ability to use organizational memory without being controlled by the past. In his post (some) rules are meant to be broken, Brett Miller makes this point very well.

You can see this in the way many organizations apply the idea of “best practices”: capture past practices that worked and apply those practices, as is, to future situations that are similar. While this works fine for what I call “information” processes - and is a critical step in helping any organization improve - it is not appropriate for “knowledge” processes. ...

... This is not to say that past experiences should not be exploited in creating/acquiring new knowledge. Except for the rarest of occasions, most new knowledge created today is derivative of something past. It is important to know what has come before and learn from the successes and failures of others. The rules that come from those past lessons then become the framework for the future.

But of course organizational memory does not only consist of rules (best practices), but all sorts of other knowledge (including evidence, interpretation and stories) that may be relevant to developing next practice. A lot of this knowledge will surely be maintained in electronic form, not just in people's heads, some structured or semi-structured, using a broad range of social software.

Furthermore, evolving practices (organizational learning) will typically require collaboration between different people across the enterprise, and we may reasonably hope for software tools to support this learning.

Once upon a time, information systems maintained a clear distinction between highly structured data (in old-fashioned databases) and loosely structured information (in a wide range of formats, including Office). But we now need to find new ways of integrating this information to support the intelligent organization.

Loose Coupling: Innovation and the Web

"Cosy social networks are stifling innovation", according to an article in the New Scientist (5 August 2009).

This is a familiar argument in a new context. It has often been argued that corporate culture can inhibit innovation, and that groups responsible for experimental products and processes tend to perform better if they are put into a separate organization unit at some distance from the main offices. In recent years, many companies have set up R and D units in special science parks, co-located with similar units from other companies, usually with links to a nearby university. This is essentially applying architectural thinking to the geographical location and distribution of certain classes of capability, and reflects a common belief in the importance of these factors.

But interaction and clustering is nowadays much less dependent on physical geography, and much more dependent on virtual online communities and networks. The New Scientist article quotes Viktor Mayer-Schönberger of the National University of Singapore, who argues that today's software developers work in social networks in which everyone is closely linked to everyone else. "The over-abundance of connections through which information travels reduces diversity and keeps radical ideas from taking hold."

What Mayer-Schönberger sees as an over-abundance of connections is actually another form of tight coupling. If we want to build the capability for radical innovation, we need to create a decoupled space to support a loosely coupled knowledge cycle. Which means careful attention to the effects of social networking and organizational intelligence.

Social Networking as Reuse

Just been reading an excellent blog post by Tim Berners-Lee about the Giant Global Graph, telling a familiar story in a powerful and elegant fashion, and describing the development of the internet and semantic web in terms of increasing abstraction, interoperability and reuse.

• The Net - full name International Information Infrastructure (III). Abstracting away from the wiring to allow interoperability and reuse of computers.

• The Web - full name World Wide Web (WWW). Abstracting away from computers to allow interoperability and reuse of documents.

• The Graph - proposed name Giant Global Graph (GGG). Abstracting away from documents to allow interoperability and reuse of resources and relationships.

Berners-Lee focuses on the interoperability of relationship descriptions - friend-of-a-friend (FOAF) descriptions and the like - but of course these can be regarded merely as a special kind of document - a document that happens to be expressed in the form of a graph.

But that set me wondering about the next logical step. For some people at least, social networking is not just about finding new acquaintances (so-called "friends") but also finding new ways of connecting with existing acquaintances. I accepted a Linked-In invitation from someone I'd corresponded with on a Complexity-and-Management mailing list, and found myself deluged with messages asking me (among other things) to vote for him in some local election in the USA and to buy real estate in Florida. While this kind of reuse might be regarded as at least a breach of etiquette, if not downright spam, it is not unusual for people to try and forge business relationships with people they have met socially, and vice versa.

Why do wealthy people send their children to expensive schools? Not just because it gets them a better education, and a better chance of getting into a better university but because it buys them into the "old boy network". It is not necessary to know exactly how the child will benefit from membership in this network to be convinced of its value (and the disadvantages for those excluded, for whatever reason).

Here's a fictional example of the old boy network at work. An executive within the prawn sandwich industry talks to a journalist who is the Chief Sandwich Correspondent of the Daily Prawn, and is told about a plan by the National Prawn Authority to reduce the permitted level of iodine. When she gets back to her office she picks up the phone ... The following week, she and the Deputy Prawn Minister both happen to be present at an informal lunch, at which the conversation happens to touch upon the iodine question ...

I think it might take a while before Linked-In and Facebook can replicate this kind of affordance. This is not just a question of shared semantics (meaning) but of shared purpose (pragmatics).

However, this example illustrates the kind of instrumentality (use-purpose) implicit in social networking. We may wish to use other people's knowledge and know-how, we may wish other people to use our own knowledge and know-how, and we may wish to help our friends as well as ourselves. What we don't want is to feel we are being "used".

But just as the net has changed the way we think about computers ("the network IS the computer"), and the web has changed the way we think about (hyper-) documents and (web) services, so the graph (if that is what we must call it) is going to change the way we think about friendship and about social protocols (etiquette in the broadest sense).

If there are many people who have the required know-how, it is the graph that tells me which one to contact. Do I pick the one that is closest, or with the strongest connections? Do I pick one who is as distant as possible from my competitors? Am I looking to pay back past favours, or to put someone in my debt? Or do I pick someone who is outside the usual bunch, who would help me extend my graph into new areas?

It is already a known phenomenon that people sometimes seem more concerned with the quantity of their "friends" than with the quality of their friendships. As we get better tools for visualizing the Graph (across multiple platforms), some people may start to worry about the shape of their graph.

In the old days, people who were obsessed with the social position of their social acquaintances (and would adjust their relationships with people whose social position altered) were known as snobs or social climbers. Now there are people who wish to know how many venture capitalists are contained in their FOAF graph, in how many different countries, and people who would upgrade an acquaintance when he moves from a university post to an executive post. Plus ca change.

So that seems to be the direction we are heading. The graph is not merely a machine-readable description of a social network, it is the social network itself. And the value afforded by social networking comes from abstraction and reuse. In which case, there are some challenging implications to explore ...

Social Networking

Networks expand by invitation. I received several independent invitations to LinkedIn before I decided it was worth joining (since that gave me a ready-made network on LinkedIn). I have started to receive invitations for other networks, but I haven't accepted them yet. This is an example of the Change Agent Cascade pattern.

While these networks may be useful, there are several problems with them.

1. Commitment. If I join a network, I need to make it work for me. This means loading some contacts, carving a profile, responding to contacts. This is a cost, which I incur in the hope of some professional, social or other benefit. If I am not willing to make any effort, I might as well not bother.

2. Ambiguity as to the purpose of the network. Some networks have a rhetoric of mutual support, endorsement and referral. But it is hard to see how this purpose can be fulfilled when people load hundreds of undifferentiated contacts into the network. (I have received multiple invitations from people I hardly know, who appear unable to remove obvious duplications.)

3. Network inflation. Quantity pushes out quality. If someone has a thousand contacts, I presume he doesn't know many of them very well, probably hasn't even met half of them.

4. Duplication between networks. If I join multiple networks, I then need to replicate my contacts on each network. (I have had invitations from the same person to join his network on multiple networking platforms - I cannot see that this makes sense to either of us.) There seems to be no mechanism for federation between networks.

5, More radically, people are turning their back on networking - or at least being much more selective. Kirsten talks about Invitation Block. Seth Godin dismisses "It's not what you know it's who you know" as myth number ten. (For the purpose of these myths, see post on Protective Lies.)