The Facebook Effect, by David Kirkpatrick's Notes

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The following is the first-ever excerpt from my book The Facebook Effect: The Inside Story of the Company that is Connecting the World, to be published June 2010 by Simon & Schuster. The book is in the final stages of production, and I wrote this last summer. This happened earlier than I predicted--today. That's why I thought it worth putting out this note. Otherwise, I think the passage mostly remains pertinent. Obviously I now have to tweak the text.

"Zuckerberg talked about adding Don Graham of the Washington Post Co. to the board as far back as 2005, even after Accel outbid Graham to invest in Facebook. But both agreed then that the company was still too small. Zuckerberg finally landed Graham in 2009, finally filling all five board seats. He admires Graham's long-term view of his business as well as the structure of the Washington Post Co. that enables it.

Stock at the Post, like at The New York Times Co. and many other media businesses, is divided into two classes. Common shares are issued and held by the public and institutions, as usual. But a second class of preferred stock is held primarily by members of the newspaper's founding families. It carries enhanced voting rights in an effort to insure that family members cannot be outvoted by holders of common stock. Such a structure insulates management and family from the vagaries of public investors who might focus too much on short-term financial matters. Its ostensible purpose is to protect editorial integrity and a corporate spirit of public service.

Before Facebook goes public, most likely sometime in late 2010 or in 2011, Zuckerberg plans to implement a similar arrangement at Facebook. He has made that clear to his board and major investors. That will assure that he and his allies--whoever he includes in a preferred stock arrangement--will retain control of Facebook after it goes public. Google implemented a similar structure at its own IPO in August 2004. Afterward, management and directors controlled 61% of Google's voting power through preferred shares that carried ten votes each, while common shares were allotted one vote. Facebook probably won't go public until it reaches at least $1 billion in annual sales, a level it could achieve in 2010."
The distinction between Facebook and Twitter remains misunderstood. The flurry of coverage surrounding the apparently incipient $100 million investment in Twitter (giving it a $1 billion valuation) compounds the confusion.

In today's New York Times the redoubtable Brad Stone writes, "Both firms are essentially on the same mission: to allow people to share with friends and fans what they are doing now, in real life and on the Web." I would argue that is factually incorrect. Facebook's mission has more to do with identity and friendship than with sharing per se. Facebook aims to facilitate sharing, but only through the sophisticated maintenance of identity-based connections. That has been reinforced in innumerable conversations with Facebook executives in the last year as I reported my book The Facebook Effect, which aims to be the exclusive inside story of the company. (To be published by Simon & Schuster in June 2010.)

Facebook is designed around the notion of reciprocal connections between two people who know one another offline. Twitter connections, by contrast, are almost universally asymmetrical. Twitter is thus fundamentally a broadcast service, through which you tune in to the output of quasi-public entities whose information you want to follow.

Those who will benefit most from Twitter are public people like journalists, celebrities and others who have a large number of fans, as well as institutional entities like brands, companies, and government agencies. I view Twitter as something like a cable box--through which you can subscribe to broadcasts about things you care about. This is a very valuable function.

But it is unlike the core function of Facebook. That service's fundamental strategic direction is defined by its Connect service, which enables users to link their list of friends--a core part of their identity--to activities anywhere on the Web. That activity is projected back into our Facebook network so friends can learn what we are doing, if we choose to inform them.

Twitter is a service of revolutionary utility--its greatest virtue is its simplicity. But all the coverage almost universally gets one thing wrong--the distinction between readers and writers. Most of those 50 million+ users of Twitter.com (plus the many millions using ancillary readers) are listening to the broadcasts of others. While the company does not release this information, all the evidence suggests that the average Twitter user is a reader rather than a writer, spending far more time following the updates of people like Oprah Winfrey, Ashton Kutcher, Britney Spears, or Virgin America airlines than Tweeting about the party they're about to go to.

For the ordinary user there is little reason to make regular public broadcasts. If it's an issue of communicating with friends, Facebook does that more efficiently. I see very little likelihood that the preponderance of the 300 million+ active users of Facebook would ever feel they need to become regular broadcasters on Twitter. Most people are not public people nor do they wish to become so.

The confusion between Facebook and Twitter is compounded by the fact that Facebook has also incorporated a set of asymmetrical relationships into its social graph. Facebook has undeniably shown defensiveness towards Twitter in the last year. Mark Zuckerberg & Co. clearly worried about Twitter's momentum and ability to enable broadcasts to unlimited groups of fans. The service thus beefed up its Pages for public figures and businesses, which enable any number of fans to follow broadcast activity there. It gave individuals the ability to project their own information to "everyone" (a feature not much used thus far), and recently enabled the use of the @ indicator in updates. The further development of these capabilities does begin to suggest a duplication of some of the essential functionality of Twitter.

Now, to the degree Facebook members want to make public pronouncements, they essentially can. Related features remain to be built, but the outsize paranoia that marked Facebook's reaction to the initial explosion in Twitter has diminished. I don't see Facebook as the most likely eventual buyer of Twitter. I suspect it will be Google, though a case could be made that Microsoft, Apple, AOL or Yahoo also should want to own Twitter, especially as Facebook heads towards half a billion users.

One might argue that Twitter could build in an overlay of identity and reciprocal connection on top of its existing set of links, thus coming more to resemble Facebook. It certainly could, especially with another $100 million. But unless Facebook's members find its delivery of such services to them inadequate I'm not sure why many of them would switch over and go through the inconvenient process of reassembling their network of friends. There are also other fundamental differences between the two services, notably the way Facebook automates the process of updating your friends about actions you take on the service and, via Connect, around the Web.

As Twitter continues down the path of becoming a superbly efficient method of broadcasting to the world, Facebook will keep refining its ability to offer users an automated identity-based infrastructure for communicating with friends.
Facebook's new open stream API, announced today, marks another significant turning point in the technical evolution of the service. Like the launch of Facebook Platform in 2007 and the more recent introduction of Pages for commercial entities, this announcement should be seen as designed to enlist partners who will encourage Facebook members to share even more information.

Facebook has proven impressively adept at reconfiguring itself so that other companies, organizations and software developers can contribute to making Facebook a more interesting place. Keep in mind--the overarching goal of Facebook and its CEO Mark Zuckerberg at all times is to insure that the supply of interesting information inside Facebook continues growing and becoming more diverse. Facebook is a service designed to make it easier to share information. This new software approach is part of that strategy.

On one hand, the first impact of the change will be to enable Facebook users to see information outside the service which they would otherwise see on their Facebook home page--in their "stream." Developers will build applications which enable people to slice and dice the information produced by their friends inside Facebook. We'll see tools to enable users to filter their streams in any number of ways. You might want to conduct a one-time search--i.e. to see all the information any friend has posted in the last 24 hours on the possibility of a flu pandemic. Or you might want to set up an ongoing stream comprised of specific types of information--say Facebook mentions of your company. Or perhaps you want to look just at data that was produced between 9pm and midnight last night.

This is all information that Facebook currently makes available to you but that you might miss if you have lots of friends because your stream is constantly being updated. It's time-consuming to refresh it over and over in order to see earlier items. Since the redesigned home page and the introduction of the stream increased the amount of information flowing to you inside Facebook, there was a crying need for these types of filters. Making them available--albeit outside the confines of Facebook itself--should reduce at least some of the recent discontent among users about the new stream.

There's no question that this introduction is a response at least in part to the large success within the more sophisticated strata of the Web community of Twitter and its related applications like Tweetdeck. Twitter's stream has always been open, as Facebook's now will be. That so many applications emerged around Twitter--less than 10% the size of Facebook in users--should suggest the immense opportunity now that this much larger universe of users and data is available for similar sorts of developer innovation.

But the ability to more finely tune one's stream to see certain types of information should also lead over time to more information being shared. The new API also enables any Facebook member to contribute items back into Facebook from whatever site he or she might be on. Those items then go into your friends' streams. Seeing more should lead to a desire to produce more. This virtuous cycle is likely to continue, with better viewing tools leading to more production of more useful and finely-detailed information.

Any of the kinds of tools we might imagine coming to exist in such a now-likely scenario could have been created by Facebook itself. But just as opening up the applications platform to others led to a profusion of new capabilities, so will this. Facebook is again outsourcing innovation, hoping it will happen faster. For instance, imagine a location-based application for the iPhone and Facebook. Using the new APIs, it could continually and automatically broadcast information to your friends about your location or some other aspect of your activities.

Or here's another possiblility enhanced by this announcement--Facebook now has an "everyone" option in its privacy settings, but it has not given us a good place to see that information. Someone could build a Twitter-like reader for public posts, videos, photos, etc.

Once such new API-driven services proliferate, Facebook will have the option of licensing or buying any of them for use inside its own walls. Facebook can pick and choose the most popular or best designed new features.

For all the innovation that is likely, I suspect the large majority of Facebook's members will not much avail themselves in the near term of most of the new services that take advantage of the new API. That view might not make sense to those impressed by the capabilities of Twitter and its ecosystem of related applications. But for all Twitter's media celebrity, it is primarily a tool of early adopters, geeks, and media junkies--a very small community by the standards of Facebook, which in all things now is intended for everyman. Facebook's users will continue to feel most comfortable and safe transacting their information-sharing within the clean, well-lighted rooms of the main service.
It's always better to be arch, in the view of New York Magazine, whose cover story this week is about Facebook. But for all the magazine's best efforts, this time it fails at condescension. Misleadingly entitled "The Facebook Revolt," the article doesn't really have as much nasty to say as the author and editors appear to have intended.

It opens with Julius Harper, the Facebook member who created the most important protest page against the recent terms of service changes. He obligingly leads the reporter, Vanessa Grigoriadis, through the story of his protest, but in the end seems more appreciative than apprehensive about Facebook's response. "I'm going to give them the benefit of the doubt," he tells Grigoriadis.

So she is left to try to find something to protest about herself. Yet, after evaluating her own use of the service and that of her friends, even that leaves her at a loss. "I don't want to leave Facebook," she confesses reluctantly, while cautioning that that of course might change. Among the things which might later alienate her: "the wrong ads, too much information about too many people, some invisible level where being commodified starts to drive me nuts--when I might stop showing up, living my life in the real world, checking the site every couple of months. Monetize that...bitch."

Well, yeah. Facebook might screw up. This is another article whose headline leads you to think it already has, then backs away from the notion.

So Grigoriadis ends up merely surveying Facebook's landscape--which, happily, she does with some deftness. Once the sensationalism is left behind, there is interesting analysis here, especially of the service's emotional and sociological impact. Here for example is one insightful passage: "In a time of deep economic, political, and intergenerational despair, social cohesion is the only chance to save the day, and online social networks like Facebook are the best method available for reflecting--or perhaps inspiring--an aesthetic of unity."

Another: "An uncanny simulacrum of your life has been created on the web. It may not be too hyperbolic to talk about a digital self, as a fourth addition to mind, body, and spirit. It's not the kind of thing that one wants to give away."

There's an interesting quote from Facebook's product boss Chris Cox: "I don't think of our users as customers. That reminds me of someone coming into a store and buying a sandwich. We're all Facebook users here, and our parents, friends, colleagues, and loved ones are Facebook users. This is a much more intimate relationship, frankly. We take it very seriously."

I also liked this passage about what Grigoriadis gets out of Facebook: "It's given me a tool for exceptionally mindless, voyeuristic, puerile procrastination; crowd-sourced pesky problems like finding a new accountant; stoked my narcissism; warmed my heart with nostalgia; and created a euphoric, irrational, irresistible belief in the good in men's hearts among the most skeptical people I know--people who should know better." But for all that long sentence's candor and self-revelation, its final clause is what makes it belong in a New York Magazine article: Don't rest with anything benign. Cynicism is what makes real journalism.

Oh, and I like the obligatory quotation of Nicholas Carr--always good for the skeptical view on anything technological. The less he knows about something the more willing he is to opine. "Facebook is walking a fine line of keeping the trust of its members, and wanting to exploit them for profit," he is quoted saying, profoundly. "It's having a tough time balancing the two." Yeah, like it's easy for all the other companies in the universe, isn't it, Nick?

Such issues are universal, but they are, I grant, more interesting because Facebook is now occupying a more central cultural position than almost any other business I can think of. It is the ultimate convergence of techology and society--at least so far. That's why New York Magazine had to find a way to put it on the cover, and why I'm writing a book about it.
If you're wondering why Facebook hasn't surrendered to the chorus of voices complaining about the new home page, it's probably because the company is watching something a lot more eloquent than what people are saying--the data about what they're doing. This is the most important point in a good post about the changes by veteran Facebook-watcher Nick O'Neill.

Recall the original news feed protest in September 2006. Within days 10% of Facebook's members--about 700,000 people--had joined groups protesting the change. People even protested in the street in front of the company's offices in Palo Alto. But Facebook knew the changes were going to be a positive, because they could see data that showed people were using the site more, not less, since the redesign. It's quite possible the same thing is happening here. But in any case, if the usage data shows people are using Facebook less, then the home page will be changed.

Robert Scoble, the veteran blogger, has written the most unequivocal endorsement I've seen of the changes, entitled "Why Facebook has never listened and why it definitely won't start now." He sees the motive of the change not to have been to imitate Twitter but to set the stage for a Facebook that is easier to monetize. Now the company can insert data from pages--often commercial information--into the stream alongside updates and other behavior from your friends.

Scoble's post would be important in its own right. But today Dustin Moskovitz, the Facebook co-founder who left a few months ago to start his own software company, posted a status update that was an endorsement of Scoble's point of view. Moskovitz retains an intense interest in the service and his views are likely in synch with many at the company. In a response to a comment on his status message, Moskovitz writes (about Scoble's post): "His point is that the best companies know what their customers want better than the customers do. I think that is the basis of the difference of opinions between people on the different sides of this."

As for the changes themselves, there are a lot of things to like. For years I have told people at Facebook that it frustrated me that you couldn't rewind the news feed and go farther back than the meager data the software presented you. Now you can. It's a big deal, one of many.

Another more obvious thing to like about the new home page is the ability to put friends into groups. Once I go through the tedious process of mining my friend list, I can have a group just of my best friends, or just of colleagues from Fortune. When I want to know what they're up to, I can simply view that stream.

I do wish Facebook still had some version of those old sliders that enabled you to ask for more or fewer status updates, more or fewer photo stories, more or fewer relationship change alerts, etc. However, I suspect that in some form they will return. I also think Facebook has done a poor job of educating its users about the meaning of the changes and how best to use the new home page. I'd like to see an educational onslaught--videos, how-tos, etc. With this many users of this many varieties, sink or swim is not a sufficient migration strategy.

Even Moskovitz writes "I think fb should 'listen to its users' in that feedback is valuable and further changes are inevitable and may as well include some positive changes."

But Facebook has never been and never will be a static service. It changes every day, and that's a good thing.
There is widespread dissatisfaction with the new home page, and some are saying the entire move was a gigantic blunder--Facebook's "New Coke," one commenter called it on this page. I don't think it's so clear-cut, but there are big problems with how the changes were introduced.

Facebook clearly had to do something to make it easier to categorize friends into groups, especially as more and more members began to accept friend requests from people who they really weren't that friendly with. In that sense the changes were a clear step forward.

But with the changes it's still not easy enough to put people in and out of the groups. Meanwhile, users are uncertain how to control--or if it's even any more possible to control--what sorts of info goes into each group "stream." There's uncertainty about the relationship now between "what I see about you" and "what you see about me" once a user is put into a group. And in general, I think FB put too much emphasis on status updates in the new home page.

The company says it wants to consult with users about changes, but it's hard to know how best they should. If you have good ideas on process let's hear them. With roughly 200 million users, introducing any change will upset some significant number.

Facebook has no choice but to keep updating the service as user behavior and the Web evolves rapidly. And while the numbers in that unofficial poll I pointed to are dauntingly lopsided, they are still very low for a service this large.

My suspicion is that the company will tweak the new design soon in ways that reduce the grumbling. But one thing is for sure--if Facebook stays static merely in order to avoid offending some members it is sure to get in real trouble.
The redoubtable Nick O'Neill at the AllFacebook blog had a good post yesterday suggesting that Facebook is about to out-Twitter Twitter by enabling completely open status updates inside Facebook. You could, presumably, follow short updates from all your friends and all the pages and groups you fan or join, plus anyone or anything else, probably inside or outside facebook. But you'd see it all in a feed (or to use the latest terminology, "stream") inside facebook. That stream would be viewable in parallel with all your other customizable streams which are supposedly about to appear on your home page. (They were announced last week but haven't yet appeared. All signs are they are imminent, though--product boss Chris Cox yesterday changed his status message to "dusting off my launch hoodie.")

To underscore the likelihood that O'Neill is right, check out Mark Zuckerberg's latest Twitter tweet which includes this: "I'm looking forward to when people can have unlimited connections on Facebook soon!" This would certainly not mean any diminishment of privacy--it just means the possibility of adding a new form of information-sharing on Facebook--even with people or groups you have expressed no other affinity with.

Facebook tried and failed last fall to buy Twitter, as confirmed in a good interview by Business Week's Spencer Ante last week with Facebook board member Peter Thiel .

Another minor sign that this is likely is the way the new Fan pages (like this one) enable updates just like a profile does. But so far as I can tell there is yet to be an easy way to go and see all the updates from your fan pages. That's probably because the intent is to put those updates into the Twitter-like feed.
Facebook is facing complaints in a number of quarters that its customer service is not responding adequately to users. Here is an article on the AllFacebook blog explaining the difficulty relatives of some deceased members have getting the former member's page turned into a memorial or else removed altogether. And the Washington Post reports that people with strange last names, like Six or Batman or Christmas, are frequently denied the ability to create Facebook profiles. But despite this apparent vigilance, the article notes there are currently 28 profiles under the name Heywood Jablomie.

And a group of supporters of Israel are complaining that after vandals hijacked the group “I Wonder How Quickly I Can Find 1,000,000 People Who Support Israel," created by 14-year-old Todd Snider, not only did Facebook not help him regain control of the group, but it ended up disabling Snider's account.

It all suggests that better procedures and more standardized policies are needed. People want high-quality customer service even though they are paying nothing for Facebook. It's a commercial conundrum but one that will not be resolved without action on Facebook's part.
There is a lot afoot at Facebook.

First of all, I like this new form for Pages, now more like profiles. I believe that you "fans" will get more value out of The Facebook Effect's page now. The former structure made it difficult to stay in touch with a page's fans. People simply don't check the "updates" tab in their inbox, where information formerly appeared. This should be a far more effective way to stay in touch with a page. I had been complaining to Facebook execs for some time about how unwieldy the Page structure has been for this kind of a blog or Klog, and they said to hold on, they were going to fix it. It looks like they have.

More importantly the latest changes to the home page, or news feed, are historic. As Mark Zuckerberg writes in his blog post on the subject : "This year, we are going to continue making the flow of information even faster and more customized to those you want to connect and communicate with, no matter how broadly or privately." The ability to sort information and feeds by friends and friend groups is a long-overdue change in Facebook's structure. More and more information will now be flowing through Facebook. The ability to better categorize it will enable us to tune in to the types of information that we most care about--relating to both our friends and to our other interests.

There is a strong connection between the change to Pages and the change turning the news feed into a controllable stream. Both should put more relevant information in front of you as a user of Facebook. In some ways the new Pages give Facebook a quality somewhat similar to MySpace. On that service there has always been a commingling of personal and commercial profiles. However, Facebook is giving us a much more refined and controllable way to receive information from these various sources.

While sharing is what Facebook has always been about, up until now that sharing has primarily been between individuals. Now that we can integrate other sources of information into our stream in a more formal and defined way, Facebook is laying a foundation to carry vastly greater amounts of information. If I am a fan of the New York Times and I see their articles in my feed, that could be a revolutionary breakthrough to the way Facebook is used.

This set of changes makes me wonder whether for the average Facebook user there may begin to be less reason to operate out on the open Internet. If more and more content comes to you efficiently here in Facebook, any organization or company can have a page that goes into your feeds, and you can slice and dice it to your needs, won't that reduce the amount of time you spend elsewhere?

One final note--Facebook's changes last week in response to its terms of service controversy are revolutionary in another way. Facebook very swiftly responded by, in effect, moving toward user-driven democracy for the service. (Here's a so-so article in PC Magazine that at least has the right headline: "Facebook Turns Site into a Democracy.") By announcing that all users will be able to opine and vote on the new statement of rights and responsibilities and on the proposed Facebook principles, Facebook seems to be showing that it really wants its users to control the service. This is radical, and perhaps unprecedented on the Net.

Please tell me whether you agree with any of this.
I am appalled by this article today on Fortune's web-partner CNNMoney.com. Writer Paul LaMonica, whose work is typically better, is jumping on a classic media bandwagon--let's knock down whatever is on top. In this case it happens to be Facebook. His article, entitled "Why I Hate Facebook," is idiotic.

He admits he's never used it then goes on to knock it for perceived failures which are for the most part only stereotypes. It would make more sense to attempt to figure out why 175 million people are avidly using it, with 5 million or so more joining it each week.

At least Fortune itself has done justice to this amazing phenomenon with its current cover story How Facebook is Taking Over our Lives, written by someone who has more than a clue, my super-smart colleague Jessi Hempel.

As for LaMonica, it appears the main reason he hates Facebook is because it might not make money. Give me a break. CNNMoney and Time Warner deserve better.