Paul Barter Headshot

IPO or Not, Facebook Let Us Down

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On the eve of the IPO, Facebook couldn't look more different from what we hoped it might someday be. The problem is that no one's happy: Customers are subjected to more and more ads, and the companies who created those ads aren't seeing much of a return on investment.

On the customer side, users don't seem enamored with Facebook Timeline, or the parade of privacy transgressions which have resulted in terrible user satisfaction. Even an informal poll I conducted at a dinner party said that people only "merely tolerate" the site.

Marketers on the site aren't especially pleased either. Paying marketers, that is; As a free-to-use direct line of communication, a brand presence on Facebook is absolutely worth the money. But this tool is still imperfect. Marketers, for instance, aren't able to get feedback on how many of their "fans" have chosen to hide branded messages. Companies that are ponying up money to buy increased exposure aren't finding a great return on investment, and it seems that Facebook's increasingly invasive social ads still aren't as good at producing business results as Google's approach.

While Facebook did an outstanding job of -- and deserves to be applauded for -- keeping the site free of advertisement for so much of its history, now that is has finally "sold out" it seems to be doing so at the expense of the user experience. This is a problem because it's the user experience that brought so many to the site in the first place. This puts the two stakeholder groups -- users and advertisers -- at odds with one another. It doesn't have to be this way, but so far Facebook hasn't found a way to do it right.

But the IPO adds another wrinkle to the equation: a new group of stakeholders, the shareholders, who only care about growth. To keep growing after the IPO, the company only really has three options as it stands: get more users, increase ad effectiveness, or take a slice of every transaction on the site.

With half of all online users already on Facebook, this first approach is tricky. At a certain point, there just won't be anyone else to join the site. When everyone's on the site, the priority becomes reducing attrition -- the job becomes to keep them there, which is hard when users continually feel bitter and alienated.

The second approach, increasing advertising effectiveness, isn't favourable, and would require some large, structural changes to the way Facebook displays ads. Marketer-chosen segments haven't been particularly effective, at least compared to Google AdWords. It's possible that a solution exists here, but so far all of the brilliant talent that money can buy hasn't been able to find it. Poor attempts will eat into the user base and send them along to a competitor or just reduce their engagement.

The third option amounts to becoming an online currency. This will be difficult when the site is trusted so little. This puts Facebook in a very awkward spot -- though to be fair it's a spot they chose to be in. Facebook thought it had two geese on its hands: the user and the advertiser. Now it seems as though it might have killed them both before either could really start to lay those golden eggs.

If we have one piece of advice for Zuckerberg, not that we expect he'll take it, it's this: focus on your nearly one billion users, treat them with respect and keep them happy. If you do that, they'll take care of you.