Betwixt and between: Facebook’s act of desperation

June 5, 2012

On Monday, the Wall Street Journal reported that Facebook is considering lowering the minimum membership age to include tweens. It raised eyebrows and kindled a new discussion about privacy and the propriety of inviting youngsters into what the company aspires to make the world’s biggest salesroom.

But I have a different concern: Soliciting children would be pretty strong evidence that Facebook needs a big boost to its already staggering 900 million membership to justify its valuation and business model. Having courted every early, middle and late adopter possible, there isn’t much low-hanging fruit for Facebook anymore. But courting tweens would inevitably invite scrutiny and regulation, since the prospect of cyberstalking is even more toxic that cyberbullying.

In other words, the potential rule change looks like an act of desperation. Coming off a miserable stock market debut, both the merits and atmospherics of this notion are decidedly bad.

It’s easy to see why this would be on the table. Facebook has to prove that it can sell things on a massive scale, that it is the 21st century’s answer to television. All of that seemed possible before it went public on May 18, as the company’s valuation was pushed up steadily for months in thin trade on private exchanges among well-heeled insiders. But the question of just how good an advertising medium Facebook can be has been pressed by a steady decline in its share price during 12 days of trading – to about 60 percent of its historical high. Until Facebook can prove its business model, it’s a good idea to keep bulking up so that a leveling off of membership, or even a decline, doesn’t turn the story really ugly.

For Facebook greater, and growing, numbers are essential. Like panning for gold, you need a lot of water to come up with a few grains. So to achieve gold-rush growth, Facebook has to mine the young end of the spectrum.

That’s partly because there isn’t much else to mine. The size of Facebook’s user base is mature – and the fastest growing demographic is already of the mature: middle-aged people and above account for 46 percent of the membership. Age 24 and younger are a mere 14 percent. The youngest age group is ripe for the picking, but the risks are high: It is most vulnerable, immature and incapable of coping with the sort of challenges even adults have trouble dealing with on social networks. So why ask for a world of hurt – unless you have to?

Facebook has flirted with the idea for a while, of course. The Journal reminds us that CEO Mark Zuckerberg himself floated the idea a year ago: “That will be a fight we take on at some point,” he told Fortune in May 2011.

It’s no secret that plenty of underage people are already on Facebook. My own daughter joined during middle school. So part of any outrage about this would have to be of the feigned “shocked, shocked” variety.

Facebook could spin this as an opportunity to help parents by making special rules about interacting and pitching to tweens, imposing technical fixes that sort of rope them off until, say, their 16th birthday. It can’t do that now, since these tween accounts technically don’t exist. Facebook can’t be expected to protect people it’s obligated to keep out or kick off.

But that’s the spin. Underlying it is the commercial imperative. Admitting tweens would continue a long-term expansion strategy that created the biggest tech IPO in U.S. history from a college dorm project. It would be only the latest example of Facebook moving further away from its roots as an ad-free, exclusive network for Harvard students. The irony is that Facebook only found fame and fortune by admitting anyone – over 13, that is.

This time opening the door wider feels very different. Lowering the age of consent would be an admission by Facebook that even a billion (members) isn’t cool. And that’s not cool.

6 comments

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“Me!,Me!,Me! Kiddie”, Soon to be available at Facebook.
Facebook is just another Wall Street Bankster with millions of Sucker-Members. 21st century’s social deterioration to nothing more than a distorted virtual life, virtual reality.

Posted by GMavros | Report as abusive

John, looking back at how Facebook got started — students at Harvard, the Ivies, Stanford, Texas, UK elite, et al in a kind of et seq rollout, one could make the argument that practically every marginal customer or group of customers, after those future very high-earners, was less economically attractive than the last.

900 million, if one believes that number, must come pretty close to encompassing the on-line buyers of the world. It’s North America and Europe combined with the middle and upper middle of Asia.

They could add the entire rest of the world and not double their attractive base, hence not double revenues.

Which makes Facebook seem like one of the all-time frauds foisted on retail investors. They got what they deserved, we suppose, but it’s hard to see how this wasn’t a retail version of the 2007 Goldman Abacus AC-I deal.

Posted by WeWereWallSt | Report as abusive

Would a business model built on desperation curry favor on the Street? I don’t think so. This action, if implemented, may lead to a further devaluation of the stock.

Posted by AltonDrew | Report as abusive

I follow the Facebook Saga with some glee knowing that while an active member of the community I have never seen an ad on Facebook pages. Good job Google Chrome and AVG.

Internet company valuations based on blue sky and presumed good will are fool’s gold.

Posted by CaptnCrunch | Report as abusive

fb does not have 900 million members. – It has this amount of ‘users’, which are just cyber-entities that anyone can create at will, anytime, at in any number they want. An fb ‘user’ cannot be deleted – It is immortal by definition, and most social websites use the same policy, so they could boast big numbers of ‘users’ or ‘members’.
I know kids who’ve created multiple fb ‘users’ (memberships) for themselves, in their attempts to spy incognito on their older siblings.
I know moms who’ve created multiple ‘users’ so they could spy incognito on their teenager kids’ fb activities, their online ‘friends’, etc.
I know people who’ve created hundreds of such fb identities for technical and personal reasons.
Companies and businesses have been creating such fake online identities in huge numbers in social media sites even before fb came into being, and they keep doing so. It’s part of online marketing activities known as ‘puffing’, and it’s the oldest trick in the book.

My (educated, if I may say so) guesstimate is that the number of people who actually use fb is 1 to 2 orders of magnitude smaller than the 900 million ‘members’ or ‘users’ figure that’s used by people who don’t realize how things work in the real world, of which cyber world is an extension.

FB should invite an external, independent auditor to scrutinize its user database, and come up with the real figures.
Technically, doing so is pretty easy.

Posted by reality-again | Report as abusive

OMG! It’s a good business decision, not an act of desperation. It is fraught with peril, but me thinks Abell is desperate for a story!

Posted by LEEDAP | Report as abusive