Digital Gabe
Cutting Edge Commentary On All Things Media

Facebook’s “Negative Network Effect”

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Facebook was built on the concept of the network effect, where the compound social activity of many users in the same cohort acts as a multiplier which generates exponentially more activity than what individual users would do on their own.  Think about this in your own circle – if you know all your friends and family are on FB you’ll be more likely engage with the site, and they will too because of you.

Now this compounding phenomenon seems to be working in reverse for the social giant.  Departures of key executives are accelerating, including the resignations of their CPO last week.  That makes it 11 exec-level goodbyes in the last three months alone.

Then there’s the wildfire of unintended consequences from use of the product itself.  As an example, take the live streaming of last week’s terrorist attack New Zealand.  FB had no way of stopping the streaming itself, and then lost the battle to contain the resharing of the video.  Despite their all-out effort, they only blocked 1.2M of the 1.5M attempted reshares, which means 300K reshares got through.  Again, another example of the power of the network effect working against the mothership.

All of this is taking a massive toll on both value of the company and the morale of its employees.  In just the past week FB’s stock has lost $37B in value, which is more than many industries’ total valuation.

These are dark times for Facebook to be sure.  What makes it harder than anything, is that there doesn’t appear to be a clear path forward for the company.  They just seem to be getting slowly crushed to death by the same forces that built the company in the first place.

 

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