Facebook’s Biggest Threat? Itself

Why did Facebook win the social networking sweepstakes while hundreds of other
websites failed? Numbering among those reasons are timing and the strategy to
launch the service through colleges. Facebook also was much faster than rivals
like Friendster and MySpace. But perhaps the key reason for success:
Facebook's user interface. Basically, it has been fairly clean. Facebook
realized there is a powerful need for people to connect with friends. So why not
make it as easy as possible? The strategy has been spot-on. But lately, Facebook
has been giving into the temptation of implementing more and more change. For
example, this week the company launched another redesign of its user interface.
Now the News Feed has a "top story" listing, which is based on some type of
algorithm, thats placed above the chronologically listed recent stories. On the
right side of the page, you'll find a ticker that shows the activities of your
friends, some of which are repeated from the story sections. As should be no
surprise, there has been an uproar. With 750 million users, it is impossible to
please everyone especially with such intense daily engagement. Still, Facebook
needs to be extremely cautious. Numerous cases have shown big sites suffering
sharp reductions in user activity because of redesigns, such as with Digg and
Netscape.com. Did Facebook bother to test its redesign? It did. But testing is
far from perfect. Just look at Netflix 's (NASDAQ: NFLX ) recent changes with
its pricing and branding. Its been a disaster even though the company has some
of the world's best Internet marketing gurus. It's true that if Facebook
detects unusual problems and it will quickly it will make some tweaks. This
has happened with prior redesigns. So it seems highly unlikely that there will
be a drastic change in the user base. However, something else broader is at
work. During the past few months, Facebook actually has been adding many new
offerings, like video chat based on Microsoft s (NASDAQ: MSFT ) Skype as well
as facial recognition, improved commenting, a new photo viewer, privacy rules
and so on. The company also is encouraging more development of third-party
applications and services. Perhaps such things are the result of the competition
from Googles (NYSE: GOOG ) G+ social network or even pressure from LinkedIn
(NYSE: LNKD ). Whatever the reason, it looks like Facebook's innovations have
not been up to its usual high standards. Consider that the company already has
cut back on several recent features, such as Places and its daily-deals service.
In a way, Facebook could be going down the same path that Yahoo (NASDAQ: YHOO )
took that is, adding too many things to the site. The result is an overly
complex experience that detracts from the core service. Hey, do you really know
what Yahoo is about? Unfortunately, users and investors ultimately might ask the
same question about Facebook. Tom Taulli is the author of "All About Short
Selling" and "All About Commodities." You can also find him at Twitter
account @ttaulli. He does not own a position in any of the stocks named here.