Facebook must rekindle innovative spirit
There has been no shortage of explanations for the sudden, spectacular swoon in Facebook’s stock value last week. Meta, Facebook’s parent company, said in an earnings report that its user growth had stalled. Young people, its most valuable demographic, keep spending time on TikTok, the irresistible short-video app that has become Facebook’s most formidable competitor in years.
New privacy features that Apple added to the iPhone last year are also hampering one of Facebook’s main moneymakers, targeted digital ads. The company said that Apple’s changes may cost it $10 billion in revenue in the coming year. And Meta disclosed that it had spent $10 billion last year building out its new namesake, the metaverse, the virtual reality wonderland that Facebook is betting will be the internet’s next big thing — but that, so far, remains more virtual than reality.
Investors reeled. Meta’s stock value shed more than $250 billion last week. That’s a nearly incomprehensible amount. Only a few dozen publicly listed companies are valued at more than $250 billion. In other words, Facebook’s value has slumped by more than what all but the largest companies are worth.
But beneath Facebook’s many expensive problems is a single more fundamental problem, an issue that has plagued the company for more than a decade — and that Mark Zuckerberg, Facebook’s co-founder, has never really figured out how to address.
The problem is innovation: Facebook can’t seem to do it. The company just doesn’t appear to know how to invent successful new stuff. 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, outright copying.
Meanwhile, it’s easy to see why investors might be skeptical that Face
book is the company that will invent the next big thing, whether the metaverse or whatever 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 nevertheless full of innovations. Perhaps the most important was the release in 2006 of News Feed, the system that organizes updates from your friends into a timeline.
By combining posts in your network into a kind of realtime digest, News Feed ushered in something profound in human relations: a real-time window, available to any of us, into the social lives of all of us. The fact that News Feed — and the many other feeds it inspired, like Twitter’s — has gone on to change the world in both positive and quite negative ways only underlines its importance.
Ten years ago, though, Facebook went public, and ever since, its strategy has been less about innovation than about goosing wild growth both in its user base and its ad business. Its main technological project became scale.
Facebook’s artistry lay in its operational excellence more than its originality.
Consider Instagram. Facebook showered resources on the company while allowing its founders wide latitude in running the place. Growth surged. Today more than 1 billion people use Instagram every month.
There’s almost no chance that regulators will allow Facebook to buy another potential rival anytime soon. That leaves Facebook with another tactic it has honed over many years: borrowing other people’s ideas.
Look, again, at Instagram. When the app started, it was a simple feed of photos. Over the years, Facebook has loaded it up it with a slew of features picked up elsewhere. Instagram now broadcasts livestreams — a feature first pioneered by startups like Twitch and Periscope. One of Instagram’s most popular features is Stories, a kind of photo diary of a user’s day. The Stories format was invented by Snapchat — now called Snap.
Now Facebook is trying to do something similar with Reels, its TikTok clone. Reels made its debut in Instagram in 2020, and in 2021 Reels began rolling out on Facebook. On a call with investors last week, Zuckerberg said that Reels was doing well.
Facebook does seem capable of building new things. Its virtual reality business — built out of its 2014 acquisition of the VR startup Oculus — has created some interesting hardware, and its spending on the metaverse could well lead to wondrous new virtual worlds. But it’s reasonable to be skeptical.
The big question about Facebook’s massiveVR bet is whether it can rekindle the company’s early innovative spirit. Facebook has coasted so long on other people’s inventions that it’s really hard to see where it goes now that its mimeograph machine is jammed. Perhaps it’s time for a new inspirational corporate slogan: Move fast — and make things.