Home > Magazine > Issue 3 >

Why Facebook is More Important than Your House

By Mark Schaefer
Adjunct Professor at Rutgers University

What technology or company could emerge as the next Facebook? I love debating the implications of social media trends and technologies with my students, and this is the question that comes up most often. My short answer—that there is not going to be one—is a response that always results in surprised and confused faces.

Why is Facebook going to remain the world's largest social networking site and outlast any new competitor? In our tech-addicted society of hyper-change, we've become conditioned to be constantly expecting the next big thing. But every time we get our hands on a new gadget or test drive a new application, there is an inherent switching cost associated with that effort. If we try it out and perceive that the benefits of switching are too low compared to the time and energy it takes to make the change, we'll drop the idea and simply stick to what is already comfortable and familiar.

The idea of raising this psychological switching cost is at the very heart of most marketing efforts. We want to create so much passion and loyalty for our products that consumers would never think of switching. I'm sure you know a person who will buy only one brand of car or drink one brand of soft drink.

But for most decisions we make as consumers, this switching cost is relatively low. Unless we have extremely high loyalty to a product, we can usually be influenced by a better deal—maybe a coupon, free shipping, or an extra feature. Even a major purchase such as a car or house can be influenced by a discount. At the end of the day, these important, big-budget life decisions can even be driven by intangible values like convenience, design, or color.

But switching away from Facebook may be a more difficult decision than choosing a new home. In fact, most current users will probably never switch to another social networking platform, because the psychological and emotional investment in Facebook is so high. That's where they have their circle of online friends. That's where they go to check on the Farmville crops. That's where they go to see the daily pictures of the new grandchild. And that is where they are going to stay.

We have seen this dynamic of high switching costs played out over and over again on the social Web, including some spectacular failures with highly-touted applications like Google Buzz and Google Wave. Even though these platforms tried to lay claim to being the "next big thing" in social sharing and collaboration—and offered some bona fide innovations—the benefits could not overcome the enormous resistance inherent in the way people already share and collaborate.

The psychological commitment and emotional investment in Facebook is enormous, and it's growing every day as the company adds functionality and embraces third-party applications that add to the fun and the amount of time people spend on the site. But in actuality, Facebook is no longer a Web site. It's a lifestyle. And changing a lifestyle carries very heavy switching costs.

The addictive nature of Facebook means it will be far too costly for any company to produce and market a product that will cut into its core customer base. Successful niches will emerge to cater to special interests and those who simply hate Facebook, for whatever reason. But Facebook is going to rule as the world's most dominant social networking site.

But all is not rainbows and puppies for Facebook. Even though a world without significant competitors might seem like the best possible situation for a company, in reality, it may emerge as the platform's biggest challenge. Bill Gates once famously said that if Apple didn't exist, Microsoft would have to invent it. His point, of course, is that competition is essential in driving the continuous improvement needed to win customers and create meaningful new products.

Google and even MySpace are still nipping at Facebook's heels, but they merely represent annoyances, not real threats for now. And while it might seem like the game in social networking—at least in the English-speaking world—is over, I'll now have to add, well, "maybe."

There are serious implications of a world without true competition, and that could ultimately be Facebook's undoing. A monopoly breeds arrogance and complacency. We're already seeing this manifest itself in weekly headlines about the company's seemingly cavalier attitude toward privacy and monetization strategies. Without a true competitor to capitalize on those weaknesses, they will be addressed in a half-hearted way—there's no real implication to Facebook's bottom line. In fact, the Facebook Nation keeps growing.

Not having any competition presents another challenge—there is nobody else to scrutinize. Why do you think the Wall Street Journal is conducting an ongoing investigative series on Facebook and its privacy management? One good reason: there isn't anybody else to investigate! Nobody is going to say, "Stop the presses, Yelp had a leak!"

Facebook is the de facto flag bearer for the social Web, which means it better have a strong legal department. Likewise, as Facebook stands alone, it will be the world's biggest target for spammers, hackers, and evildoers in general. History teaches us that where corruption can occur, corruption WILL occur. The possibility of a seriously corrupted Facebook seems inevitable.

As Facebook becomes larger, complexity increases. Sharing its powerful presence with third-party applications like Farmville increases its popularity but also makes it more vulnerable to hacking. The idea of becoming infamous by bringing down Facebook will be irresistible to hackers from around the globe.

With the impossibly high switching costs that Facebook sets higher each day, this may represent the one true threat to its dominance—scandal. If something happened that compromised safety and personal security on a massive scale, it might open the door for a company whose competitive edge is lock-tight security. Short of that, Facebook may just become a part of your family for life.

Mark Schaefer

Mark Schaefer has 28 years of global sales and marketing experience and advanced degrees in business and applied behavioral sciences. He is an award-winning business writer, university lecturer, and innovator, having received seven international patents for new product ideas with Fortune 100 companies. Mark's areas of expertise include B2B marketing strategy, social media marketing, and content development, as well as sales management and retention strategies. He teaches at Pellissippi State College in Knoxville and serves as an Adjunct Professor of Marketing at Rutgers University.