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Facebook's past setbacks and today's bottlenecks

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This article was first published from the WeChat public account "42 chapters", more dry goods are welcome.
Author / Ji Wenyi


Caijing wrote a shared bicycle. It’s really good to write, and it’s immersive: “Close the door of Sequoia, Zhu Xiaohu turned and boarded the luxury yacht of Gao Lei’s founder Zhang Lei in Hong Kong.” But compared to dozens of VC institutions’ gangs I am more interested in one of the details:

Facebook once wanted to invest ino, but DST founder Yuri Milner firmly persuaded theo board not to agree. "Facebook's biggest competitor in the world is actually Tencent, and Facebook will not enter China in the short term." An insider said, "Now you and Tencent are not enemies, not friends, but you took Facebook money, you are Tencent. Forever enemy."

Compared with Tencent's market value of more than 300 billion US dollars a few days ago, its "forever enemy" is not very smooth, and even ugly. It’s not enough to let Instagram adopt Snapchat’s first Story function. Facebook simply borrows all its apps (Messenger, WhatsApp, Facebook). At the F8 conference last month, Zuckerberg was even pointed out to speak on the Snapchat prospectus.

Why is it that only one-tenth of Snapchat in a month will make Facebook so nervous? The source of everything may start with the failed platform reforms of a decade ago.

Today, Facebook's default interface is the News Feed. But if you have used the early Facebook app, you will definitely remember this nine-square grid interface (I have used this layout for everyone). It is simply a replica of the iPhone's main screen.



This similarity is not a coincidence. As early as the 2007 F8 conference, Zuckerberg announced the creation of an open social platform: “Any developer can build applications in the Facebook ecosystem” and share the data of 24 million users, enter the information flow, and even Get permission to push notifications.

This is a huge gift. Its significance for Silicon Valley entrepreneurs is comparable to WeChat applets and even more. Zhang Xiaolong emphasized "restraint" and "use it immediately". In the early days, even the two-dimensional code diversion was not given. Facebook, as the largest social platform at the time, allowed external applications to appear on the first screen and stream of information (rather than being hidden under the secondary menu as a small program), and sent a full set of APIs directly, indicating casual toss.

Why does Zuckerberg offer such a radical strategy? First of all, Facebook has limited business after all. Unlike Google, there are multiple lines of business such as search, Youtube, Gmail, music, etc., which can completely cover the user's network behavior. This has led Facebook to lose competition when it competes with Google for advertisers because of insufficient data reserves and difficulty in giving clear user portraits. With an external application, Facebook can alleviate this problem to some extent. One of the hottest Facebook apps at the time, iLike, featured music sharing.

Second, Zuckerberg saw the potential of the App Store as a platform. In 2013, a Goldman Sachs analyst gave the App Store a valuation of $300 billion, five times the market value of Facebook at the time. The marginal cost of a monopolistic platform is close to zero, and the profit model is simple and rude: matching transactions and earning commissions. More interestingly, Xiaozhe is not talking about it. Facebook even launched its own virtual currency, Facebook Credit, and tried to charge developers 30% commission like Apple.


But no one cares about them. After 18 months of the launch of the open platform, developers have begun to disdain this platform. Facebook has always maintained a peculiar relationship with developers. On the one hand, it hopes that developers will create killer works, so that more people will start using Facebook because of games and applications. On the other hand, it is worried that these applications will affect the user experience and weaken their ability to control users.

iLike is such an example. As a music sharing app, it complements Facebook's original gap in music. In the spread of social networking viruses, it added 10 million users in two weeks, covering 80% of the user community. It brings new users to Facebook, even more than Facebook itself.



However, the good times are not long. Since its launch in 2007, the Facebook Platform has been undergoing major and small adjustments, and the permissions on the developer's hands have gradually been withdrawn. By the end of 2008, the developers who were still there found that the resources that attracted them to join, the data has disappeared.

What is even more confusing is that when some developers abuse APIs and send pushes and reminders to users frequently, Facebook does not penalize them for punishment. Instead, it is a brain-closed push-dependent API that prohibits third-party ad networks.

Some people have commented on this, and Facebook’s move is somewhat “what’s not eating meat”. In many public occasions, Zuckerberg said that entrepreneurs should create products with long-term value without rushing to think about making money. The question is, how many people can get millions of dollars in venture capital in the first year of starting a business like him? Facebook itself does not provide developers with a means of monetization, and they are not allowed to make money through advertising networks and pushing this operational skill. What does the developer take to pay?

A Silicon Valley entrepreneur even pointed out that Facebook may just see that Jobs has to pay 30% of the money in the App Store. "But remember, it took Apple 30 years to learn to do the platform."

This directly led to some applications dying. BranchOut, who had been a LinkedIn killer, fell from 39 million to 100,000 in the post when the push function was turned off. Path, Voxer, MessageMe, and other applications that rely on the "Find Friends on Facebook" API are also reclaimed.

If an application meets the most rigid requirements, none of the above kills it? Facebook's answer is that you do what I do. It launched its own music, photo, and video apps and put them on the first screen. The role of Facebook is not only the rule maker of this platform, but also a competitor. This has caused many developers to be screaming.

When Zuckerberg announced that it would spend $1 billion to acquire Instagram, the Facebook Platform came to an end. In 2007, Zuckerberg vowed that developers could make a brand new application on Facebook to get rid of their own photo app. Three years later, I didn't expect the opponent to attack from the outside.

The direct result of Facebook's platform failure is that it loses control of new products. Facebook is no longer a platform to host many products. It degenerates into a product that competes with other entrepreneurs.

This is why Zuckerberg is so nervous about Snapchat. If Facebook Platform is still there, Snapchat is more likely to be a Facebook plugin than an entire social network. Unfortunately, it is counterproductive. Snapchat captures users with a new experience, and introduces branded content to interact with users to provide a more direct and useful picture of the user. This will inevitably weaken Facebook's dominant position in front of advertisers.

So, after Evan Spiegel rejected the $3 billion acquisition, all that Facebook can do is plagiarism.

Of course, this is not the most critical issue for Facebook.

In the past few years, Facebook has increased its advertising revenue by more than 50% every quarter by increasing the share of native ads in the stream. However, unlike the search, the information flow has the problem of ad load. Through the auction ranking system, Google and Baidu can sell theoretically unlimited number of ad slots below each entry (depending on the length of the search results). Facebook and Weibo can't do this: users have thresholds for ad tolerance in the stream. Once this threshold is breached, the user experience will be greatly impaired. Currently, the ratio of Facebook, Weibo content and advertising is almost 6.5:1.

In 2016, the number of Facebook traffic ads increased by 13.5%. In a conference call last July, Facebook announced that it would stop adding a share of native ads to the stream.

For information streaming products, the revenue of native advertising is important. Take Weibo as an example. In August last year, Weibo executives revealed in the conference call that in the second quarter of 2016, information flow advertising accounted for 53% of total advertising revenue, and display advertising accounted for one-third. However, as the world's largest monthly product, Facebook must ensure a weak balance between user experience and advertiser equity. The question is, how will this affect its income?

Two situations: the

price remains the same. This is bad news. This shows that even though Facebook holds so much data, its advertising effect is not much better than others. Advertisers may put their budgets elsewhere.

Prices have risen sharply. This is good news. This shows that Facebook can control the supply to increase profits.

The first quarter earnings report released a few days ago answered this question. Monthly activity and advertising price increase were higher than the same period (advertising price increased by 14%, compared with 5% in the same period last year), but advertising revenue growth decreased by six percentage points.

Why is there such a situation? Ben Thompson's explanation is that Facebook's rapid growth in the past has come from users moving from the desktop to the mobile side with more liquidity, and this trend is undoubtedly weakening. In other words, the mobile Internet traffic dividend has dried up. The pie that fell from the sky is unlikely to be there again.

Fortunately, the Facebook section has shifted direction. According to Business Insider, Facebook will launch its own series this summer. One is a 10-minute short play, which is popular for PGC content on Youtube; the other is a TV show against Netflix and HBO.

More importantly, these content will have a placement ad.

You might ask, what is important about video with advertising? There are two reasons. First, the most popular mode in the video industry today is paid subscriptions, such as Netflix. Although paid subscriptions are good, there is an important question: Is the first condition for all payment plans promised: no ads?

This is a good thing for the user. But for video sites, the lack of advertising means they can't grab the corporate market budget from the TV station. This is a big, efficient ToB business. As long as the TV station is still being raised by advertisers, they cannot theoretically die. From this perspective, Netflix may not be the company that would disrupt the television industry.

Who is that? Video sites that really make TV stations uncomfortable will definitely adopt a free model to grab the share of advertising. Facebook, Youtube, Twitter, these companies with massive traffic can do this by integrating content services. Twitter and Bloomberg have started working together, and Youtube has also launched its own free homemade drama. This era of Warner's model will become a more common model.



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reference article: t.cn/RaxqVaP