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Losin' the kids

There’s an interview in Fast Company with the former CEO of Groupon, Andrew Morton, who was forced out of the company after some disastrous results. About halfway through he tells his interviewer, “the moment a company goes public the conversation shifts from how they’re trying to change the world and the product they’re building to how they’re making money.” Of course: we all want to change the world, but that’s not the reason investors put money into an IPO

But it’s maybe a thought that should be on Mark Zuckerberg’s mind as well these days. Zuckerberg holds onto his belief that Facebook is on a mission to change the world, but the numbers aren’t looking good. It’s hard to avoid the notion that the company’s IPO caught the peak of Facebook sentiment, and the only way is down. The company’s problem is exemplified by its Home phone, previewed this month, and summarised by my colleague Chloe Cook as “Essentially, Facebook gets wallpapered over the inside of your phone.” It effectively locks its users in to Facebook, which led the British commentator John Naughton to describe the company as a “pathogen”.

So it’s worth unpacking Facebook’s problem a little. In a line, it goes like this: the only way to monetize the site is to be more intrusive into your users’ lives, and it turns out that users don’t like that. People in mature markets aren’t leaving the site in droves, but they’re dialling down their level of engagement, visiting less often and sharing less stuff. All of which means less opportunity for Facebook to make money.

In the mobile world, this is more of a problem, since people are more aware of intrusion as it gets closer into them, and Facebook has always been behind the curve on mobile. But while it’s easy to spot the benefit to Facebook of a phone that locks you into Facebook, it’s hard to see the user benefit. The world’s not exactly short of alternative phones.

But there’s a deeper problem for Facebook. There’s a generational curve on social networking – the next generation of teens doesn’t want to do the same things as the previous one. And Facebook seems to have hit that moment. Some fascinating qualitative research with British teens was unveiled at a conference here recently, and some of the comments should be ringing alarm bells.

“I don’t use it half as much as I did. My Mum’s got more friends than I have.””I just use it to upload family photos – so my Gran can see them.”

“I just use it to upload family photos – so my Gran can see them.”

“I use it to message friends. I haven’t updated my status for ages – because you’re judged by what’s posted, so I don’t post.”

In short, if you’re in business to change the world, it helps if make a product or service that your customers want to use and your suppliers don’t feel abused by. Locking people in so you can screw them over has never been a compelling business model.

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