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INNOVATE

Facebook Is Looking Like a Victim of the Innovator’s Dilemma

As consumers sour on the attention economy, someone is going to disrupt the social media giant. The only question is whether it will be Facebook.

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BY Jeff Bercovici - 23 Jan 2018

PHOTO CREDIT: Getty Images

In 2010, Steve Jobs said something that did not age well.

Asked about the smartphones with oversized screen competitors like Samsung were beginning to offer, the Apple co-founder was dismissive, predicting, "No one's going to buy that." The ideal screen size for a smartphone was 3.5 inches, he said, that being the biggest a screen could be while still accommodating one-handed typing.

Of course, the point of oversized screen wasn't that they were better for typing but that they were better for viewing photos and videos. Jobs knew that, but he thought Apple's forthcoming iPad would satisfy that need better than any phone. For Apple to jump on the giant-phone bandwagon would only have cannibalized sales, encouraging people to buy one device instead of two.

By 2014, it was clear Jobs had been wrong. Rather than continue to lose market share, Apple released the large-and-larger iPhone 6 and 6 Plus, to monstrous sales. Jobs wasn't wrong about the cannibalization thing; iPad sales slowed after bigger iPhones arrived. But it was a tradeoff worth making. Apple opted to mess with its own business, rather than have someone else do it.

It's an episode that's worth reflecting on if you're Facebook CEO Mark Zuckerberg.

For the past 15 months, Zuckerberg and his company have been in continuous damage-control mode, attempting to rebuild trust with users and government officials. Facebook has always had its share of detractors, but the central role it played in disseminating fraudulent news reports and Russian-sponsored propaganda during the 2016 presidential election has caused lasting harm to its reputation in a way nothing ever has before. The taint has spread beyond "fake news" and election meddling to encompass questions like whether Facebook harms its users' mental health or exacerbates ideological divisions in society.

After a brief flirtation with denying responsibility, Zuckerberg has been promising to fix the damage. He's hiring thousands of new employees to do things like review ads and respond to reports of harassment. Facebook is altering the mix of posts users see in their News Feeds, showing more posts from friends and family members in response to research suggesting that "meaningful interactions" promote psychological well-being. Soon it will ask users to rate news sources for trustworthiness and use those crowdsourced ratings to determine which articles it shows in News Feed.

It's hard to know how sincere or sound Facebook's efforts will prove. As usual, Facebook is operating with the bare minimum of transparency and prioritizing its own principles--like the imperative that any solution must be scalable and reflect the values of "the community"--over outside input. As a result of these biases, Facebook tends to make the same kinds of mistakes over and over. Already there's good reason to think the company's recent moves could make divisive frauds more prevalent, not less.

But even if Facebook manages to render itself safe for democracy, there's a large and growing cohort of users for whom that won't be enough. Disturbingly for Zuckerberg, it's a group that includes a number of early Facebook employees, people like billionaire Sean Parker, Asana cofounder Justin Rosenstein and venture capitalist Chamath Palihapitiya. In their view, the root problem of Facebook is the way its focus on keeping users engaged distorts their behavior. "[Y]ou're exploiting a vulnerability in human psychology," Parker said. "God only knows what it's doing to our children's brains."

Anecdotally, in Silicon Valley right now, the most influential people are also the ones most likely to say they've cut down on or eliminated their Facebook usage. "I'm mostly off Twitter and social media as part of an effort to preserve my sanity," Lean Startup founder Eric Ries tweeted last week. Angel investor Jason Calacanis told me something similar during a taping of his "This Week In Startups" show this month. Apple CEO Tim Cook said he doesn't want children in his family using social media.

These are people who view themselves as the early adopters whose technology habits foreshadow everyone else's. Facebook should be terrified that they might be right. "Consumers will and are coming around to the realization that this business model is not in their interest," author and critic Andrew Keen told Recode. "I think Mark Zuckerberg has been rearranging the deck chairs on the Titanic with these latest reforms."

I'm part of this group, too. I've been off Facebook almost entirely since I logged my devices out of my account in October. Living Facebook-free for the first time since 2006 has made it easy to see how little it was adding to my happiness or knowledge. But it has also helped me see the places where Facebook does, in fact, offer some utility, and how a valuable product could be built around that utility.

As a digital map of my personal and professional contacts, Facebook's social graph is worth something to me. If there were a version of Facebook that encompassed, say, contacts, photos, messaging and groups, but didn't use any behavioral-engineering to drive me to engage with it more, I'd be willing to pay a couple dollars a month for it.

There's an obvious reason Facebook hasn't built such a product: As a U.S. user, I'm currently worth $60 to $80 a year in advertising, assuming I spend the typical 40 minutes per day with the service. Getting people like me to re-engage with the product as it exists is a much shorter and more certain path to making money than building a new product for which we'd very likely be willing to pay less to Facebook than advertisers are.

This is Zuckerberg's version of the Innovator's Dilemma, the well-known scenario described by Harvard professor Clayton Christensen. Companies caught in the Innovator's Dilemma get upended by market transformations because embracing them would mean undermining their own businesses. It's similar to the conundrum Steve Jobs faced when he wondered whether people who bought oversized phones would also want iPads. Why invite your customers to become less profitable?

The answer is the same one Apple arrived at: because if you don't, someone else will. Already, there are powerful signs of demand for tech products that don't treat users' attention as a natural resource to be strip-mined. People have tried deleting their entire Facebook News Feeds and and setting their iPhones to black-and-white to make them less enjoyable. "I think we're pretty close to the time that tech companies realize there's a big market for tech-addiction solutions," New York Times columnist Kevin Roose tweeted.

When that time arrives, it will represent an incredible opportunity for some other company to disrupt Facebook and end its dominance over social media. In other circumstances, Zuckerberg has shown himself alert to this kind of threat. When Snapchat was gaining traction among younger users, Facebook shameless cloned its popular "Story" feature for Instagram, even though the concept ran counter to everything Instagram and Facebook stood for to that point.

Make no mistake: Facebook is vulnerable again. Social media is a powerful technology that's here to stay, but there's no intrinsic reason it must be optimized for engagement. For all its vaunted lock-in, if someone can deliver a version of social media that satisfies the market's needs better than Facebook without its drawbacks, it will supplant Facebook as quickly as Facebook supplanted MySpace.

Of the big consumer tech companies--Facebook, Google, Apple, Microsoft, Amazon--Facebook is the only one whose business model depends on keeping users around as long as possible. (YouTube aside, Google's ad model depends on bringing users back frequently, not prolonging their visits.) If a critical mass of consumers follows the early adopters of Silicon Valley in turning against the attention economy, the uniqueness that has made Facebook a near-monopoly in social media will make it uniquely doomed.

If Mark Zuckerberg is smart, he won't wait around for that to happen.

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