Monday, June 30, 2014
It's About Trust, Stupid Facebook
If I were advising Facebook (which, I guess, I am with this blog post), I'd hang this in every office in Menlo Park and Facebook's other outposts: "It's About Trust, Stupid." It is a reminder of the issue consumers most care about (eventually) and the topic that will keep Facebook on top.
Facebook is in a very dangerous situation: It is wildly successful. If only all of us could have such problems, huh? The problem with success is that it tends to make an organization lazy and overconfident. Kodak was wildly successful. Myspace was wildly successful. The Roman Empire was wildly successful. When you are riding high, you begin to believe you are invincible, and that it is the moment you are most vincible.
Facebook has good cause to be confident, I suppose. After every change of its news feed, a million voices scream how they are going to abandon the platform, but few do (and the ones that do almost always come crawling back.) Six months ago, the buzz was so loud that "kids were leaving Facebook" that every major news outlet trumpeted the exodus with headlines, yet a Forrester study found that 80% of teens are more active on Facebook than any other social network. Facebook has taken more body blows than Rocky, but it always seems to get the last punch.
Facebook appears to have little reason for concern, but neither did Kodak, Myspace or the Roman Empire--until it was too late. The thing that Facebook's leaders do not seem to realize is that if (or when) a tipping point occurs and users start to flee, the company will be as powerless to stop it as Myspace and Friendster was.
I am not suggesting an exodus is imminent, but Facebook now has everything to lose and--let's face it--very little to gain. It is already one of the 25 largest US corporations based on market cap; there aren't too many rungs above them, but there is a bottomless pit beneath Facebook. And this is a company with a single, undiversified revenue model--it is completely and totally reliant on advertising. (On this blog, I've often criticized the company for failing to diversify, especially during an age of growth in the collaborative economy. The fact Facebook remains completely addicted to old-school advertising while social business flourishes around Facebook is an embarrassment and a huge risk, in my opinion. But I digress.)
The company's lack of diversification means if (or when) people feel they can socially engage on a safer, better, more trustworthy platform, the companies' entire business model may unravel rapidly. We often forget how rapidly confident, successful companies become the opposite. Kodak was trading within 20% of its all-time high in July 1998; a little over two years later, Kodak has lost more than 50% of its value. In March 2006, Borders was trading near its record high price; two years later it was down 75%.
When the tipping point happens, no one sees it coming (or else the stock price would be lower) and everyone is surprised at how fast it happens. Facebook needs to be less confident. The company needs to be reminded "It's About Trust, Stupid."
The company may own consumers' time and social sharing, but it is on shaky ground when it comes to trust. A year ago, a study suggested consumers trust Facebook less than the NSA and the current American Customer Satisfaction Index reveals consumers are less satisfied with Facebook than virtually any other organization.
There is good reason for consumers to have little faith in Facebook. The company has shot itself in the foot several times, and the media is not always kind or fair. From Facebook settling with the FTC for deceiving consumers to Facebook monitoring your browsing behavior to target ads to social gaming scams run on the platform to the the dubious practice of sponsored stories (which turned consumer posts into brand advertising without specific permission), this is not a company with a good track record (or any track record) in earning consumer trust.
(When the company launched Sponsored Stories, I told my Facebook rep that we would participate only if we could first secure permission from each participant. My rep questioned why we would want that and I responded EVERY advertiser should want that; a couple years later, Facebook had advertiser fleeing from the program and settled a class action lawsuit over the practice. But I digress, again.)
The latest trust issue to hit Facebook was all over the media (and Facebook) this weekend. The company allowed researchers to manipulate users' news feeds to evoke positive or negative emotion, proving the obvious--we feel happier when we see positive things and sadder when we see negative things. (Shocking! Positively shocking!) Of course, some Facebook users have reacted negatively to being treated like lab rats and having their communications manipulated. (Shocking! Positively shocking!)
It has been supremely disappointing to see some marketing "experts" defend Facebook by claiming this is no different than the sort of positioning brands have always done. They fail to recognize the humongous difference between a brand manipulating its own communications to evoke a desired reaction and Facebook manipulating your peer-to-peer communications to do the same. That is the difference between Old Spice changing campaigns to increase purchase intent in consumers and Gmail hiding messages from friends to provoke a desired response in users. It is not hard to understand why Facebook is facing the backlash over the research study, but it is unfathomable why Facebook leaders ever thought that publishing the study (much less conducting it) was a good idea.
Facebook has defended the study, pointing out it has the right to do these things based on the service's terms and conditions. To me, this reeks of the South Park parody where Apple claims the right to turn customers into human centipedes because it buried this permission into the 100-page agreement no one reads and everyone accepts automatically. The fact Facebook believes it can rely on legalese instead of consumer trust is further evidence of a serious problem for the social network. It's About Trust, Stupid.
I don't have a crystal ball, and I certainly recognize that Facebook seems invulnerable to consumers' lack of trust and satisfaction. But rather than strengthen the company's resolve and confidence, the consumer reaction to this study should really be a warning sign to those at Facebook.
No company can operate without trust and satisfaction forever, and if the end comes, it will not be something most see coming--least of all the folks in Menlo Park.