Invention

Forbes India – Meta, Apple, Metaverse: the failures of the invention of Facebook


Facebook’s value has fallen by more than all but the largest companies are worth.
Image: Shutterstock

Jhere was no shortage of explanations for Facebook’s sudden and dramatic slump in stock market value last week. Meta, Facebook’s parent company, said in an earnings report that its user growth has stalled. Young people, its most valuable demographic, continue to hang out on TikTok, the irresistible short-video app that has become Facebook’s toughest competitor in years.

The new privacy features Apple added to the iPhone last year are also hampering one of Facebook’s biggest money-makers, targeted digital ads; the company said Apple’s changes could cost it $10 billion in revenue over the coming year. And Meta revealed it spent $10 billion last year building its new namesake, the Metaverse, the virtual reality wonderland that Facebook is betting will be the internet’s next big thing – but that, until now remains more virtual than reality.

Investors faltered. The value of Meta shares lost more than $250 billion last week. It’s an almost incomprehensible amount; only a few dozen publicly traded companies are valued at more than $250 billion. In other words, Facebook’s value has fallen by more than all but the largest companies are worth.

But beneath Facebook’s many costly problems lies a more fundamental problem, one that has plagued the company for more than a decade — and one that Facebook co-founder Mark Zuckerberg never quite figured out how to fix.

The problem is innovation: Facebook can’t do it. The company just doesn’t seem to know how to invent successful new things. Most of its biggest hits — not just two of its main products, Instagram and WhatsApp, but many of its most-used features, like Instagram Stories — were invented elsewhere. They made their way to Facebook either through acquisitions or, when that didn’t work out, simply by copying.

But buying and copying other ideas is getting harder and harder for Facebook. Regulators around the world, wary of Facebook’s size and market power, are reluctant to let it swallow up other potential competitors. And Facebook’s biggest apps are so overloaded with features cloned from other places that they become chaotic and blurry.

In the meantime, it’s easy to see why investors might be skeptical that Facebook is the company to invent the next big thing, be it the Metaverse or anything else. It’s been a very long time since Facebook created something truly groundbreaking.

How long? Zuckerberg didn’t invent the idea of ​​a social network, but Facebook’s first decade was nonetheless full of innovation. Perhaps most significant was the 2006 release of News Feed, the system that organizes your friends’ updates into a timeline – also known as the main part of the Facebook app. The News Feed has revolutionized the way people browse the Internet.

On older social networks, like Myspace, you had to visit each of your friends’ pages to see what was going on with them. By combining messages from your network into a sort of real-time digest, News Feed has ushered in something profound about human relationships: a real-time window, accessible to each of us, into each other’s social life. ‘between us. The fact that the News Feed – and the many other feeds it inspired, like Twitter’s – has continued to change the world in both positive and quite negative ways only underscores its importance. Once, at least, Facebook might come up with some new ideas that could really change the world.

A decade ago, however, Facebook went public, and its strategy since then has been less about innovation and more about wildly growing its user base and ad business. His main technology project gained momentum: he would develop his infrastructure to serve everyone on earth, and he could leverage that infrastructure to stay on top. When cool new features appeared online, you could count on Facebook to bring them to the widest audience, even if they hadn’t invented those features themselves.

The art of Facebook lies in its operational excellence more than in its originality.

Think Instagram. When Facebook paid $1 billion for the photo-sharing app in 2012, Instagram had just 13 employees, around 30 million users and no revenue. Facebook has poured resources into the company while giving its founders, Kevin Systrom and Mike Krieger, wide latitude in running the place. Growth surged. Today, more than a billion people use Instagram every month, and in 2018 it was possibly worth over $100 billion. Instagram’s founders left the company in 2018 – reportedly after heightening tensions with Zuckerberg – but argued the acquisition was ultimately good for users.

The Federal Trade Commission approved Facebook’s purchases of Instagram and WhatsApp, but in 2020 the agency sued Facebook, saying the two deals were part of a “systematic strategy” to maintain a monopoly . Last month, a judge ruled that a modified version of the trial could go ahead. There’s almost no chance regulators will allow Facebook to buy another potential rival anytime soon. That leaves Facebook with another tactic it’s honed over many years: borrowing ideas from others.

Look, again, on Instagram. When the app started, it was just a photo stream. Over the years, Facebook has loaded it with a host of features picked up elsewhere. Instagram is now broadcasting live streams – a feature first pioneered by startups like Twitch and Periscope. One of Instagram’s most popular features is Stories, a sort of photo diary of a user’s day. The Stories format was invented by Snapchat, whose success in the early 2010s seemed to pose a threat to Facebook’s dominance. Zuckerberg tried to buy the company, now called Snap. No dice. He also tried several ways to clone his features. In 2017, he finally hit it big; after placing Stories at the top of the Instagram app, Facebook blew Snap out of the water. Less than a year after cloning Snapchat’s best feature, Instagram Stories were bigger than Snapchat’s. As for the rub, Facebook has also added a Stories feature to the Facebook app and WhatsApp.

Now Facebook is trying to do something similar with Reels, its TikTok clone. Reels debuted on Instagram in 2020, and in 2021 Reels began rolling out to Facebook. On a call with investors last week, Zuckerberg said Reels is doing well. But he didn’t go into much detail, and he mentioned the competition posed by TikTok so much that one suspects he’s not entirely happy with the quality of his clone’s competition.

Facebook seems capable of building new things. Its virtual reality business — built from its 2014 acquisition of VR startup Oculus — has created some interesting material, and its spending on the metaverse may well lead to wonderful new virtual worlds. But it is reasonable to be skeptical.

Facebook remains a hugely successful company, but its recent straits challenge the theory, propounded by advocates of tougher anti-monopoly rules, that it still enjoys an unfair competitive advantage over rivals. Its market value just fell below $600 billion, the threshold House Democrats have chosen for new legislation to limit the power of “Big Tech.” As analyst Ben Thompson notes, the digital advertising market, once ruled almost entirely by Google and Facebook, has recently become more competitive.

The big question about Facebook’s massive bet on virtual reality is whether it can revive the company’s early innovative spirit. Facebook has rubbed shoulders with other people’s inventions so much that it’s really hard to see where it’s going now that its mimeograph machine is jammed. Maybe it’s time for an inspiring new corporate slogan: Move fast — and get things done.

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