It's obvious that Facebook isn't or won't be able to make money. I should add "for investors". Because unlike what CNBC would have us believe, they're the only ones unhappy about Facebook.
Amid all the "buzz on the Street" or "squawk" or whatever, that's something that nobody is really noticing. It all goes back to what Thorsten Veblen noted a long time ago: the root of any financial turbulence can be traced to an unhappy capitalist(s) (the x-treme paraphrasing is mine). What exactly said capitalist is unhappy about is of little concern, it could be a tooth ache for all we know, but the fact is, he isn't hitting the trading floor until he feels better. Since Thorsten Veblen's time, this monitoring of how rich people are feeling has been extrapolated into countless indices and indicators generally known as "the market", and since about 2000, these have come to be a real time representation of, well, the life pulse of all existence. But they aren't, and what makes the people who use or buy stuff happy isn't necessarily what makes the coloured arrows go up on the Street.
In other words, Facebook is fine, there is nothing wrong with Facebook. Before the failed IPO, I could impress pretty girls I haven't seen in 5 years with my ironic use of 50 Cent lyrics just as well as I can now; before the shares missed their target price, the people I used to work with could post pictures of neglected and abused animals and make me feel bad just as easily and effortlessly as they can now.
That's because Facebook has what I call a "culture of usability". "Usability" implies that for most people, the product or technology in question is and can only be relevant during actual use and interaction. "Culture" implies that when a new product or technology appears, lots of different people converge around a general pattern of use.
To take an example, for many people, owning a car is about getting from point A to point B when they need to get from point A to point B, and owning a drill is about being able to drill a hole if and when they need to drill a hole. At the same time, and in opposition to cultures of usability, there exist cultures of identity: the guys from Top Gear use cars to define who they are even, or especially, when they are not going from point A to point B; Tim "the Toolman" Taylor (yes, I had to go there) needs more power, arrgh arrgh arrgh even, and especially, when there's no particular need to drill a hole. Note that while cars and drills are not free, the person who needs a car only to go to work and back (for simplicity's sake, let's say our worker works at a company where what you drive doesn't impact your chances of promotion or having sex with coworkers) will be less likely to buy a turbo-charged something-or-other (I'm not a car guy), and the person looking to hang up a picture on the wall will in all likelihood not be bothered by the 20 or so seconds of loud noise the drill makes to the point that he or she would shell out an extra fifty dollars for a drill with a noise-muffler. And it's the turbo charged widget, the noise muffler, that create added value, which, if you're a producer of goods, is "where the real money is."
That's the seat of Facebook's financial woes, not the fact that not enough users are clicking ads or the ones that are clicking aren't buying enough stuff. As the market-based discourse enshrouds Facebook in negative hype, what it's really trying to do is break the bad news: we don't really like Facebook as such, we're just "using" it to stay connected. To illustrate, let's take a look at a historical example of how big money has generated and perpetuated the myth of the transition from "dark ages" of usability to the "golden age" of identity with another technology that, once the differences are cancelled out, was in a position similar to the one Facebook now finds itself in.
The myth I'm referring to is the "North American Video Game Crash of 1983" (note the caps and the quotes). As the adding of the year to the end of the phrase shows, the whole concept was invented well after 1983. And invented is the right word. Yes, on the level of making tons of money on fads, a severe disruption occurred when Atari, then basically a synonym for video games, got too greedy, overpaying for licenses which it converted into shitty games; also the Atari 2600 had no lock-out mechanism, so anybody could make games, and anybody did, and they were shit. But then the story continues: The result was a glut of unsellable game cartridges. Retailers sent back the games they had already ordered, the video game "fad" was seen as just that, cue the stock footage of the angry early-1980s mob that VH1/CNN uses for half-hour documentaries about Disco Demolition/Ryan White. The whole of North America took a vow never to play video games – not just from Atari, but from any manufacturer – again, which ultimately didn't matter, because, having been pushed to brink of bankruptcy by the shittiest fad ever, retailers were adamant in their refusal to stock them.
Far from being merely the "mainstream" account, this is the only version of the story. The problem is that regardless of whether a particular account is targeted towards the business crowd or towards video game nerds, whether it's being told by CNBC or G4, the protagonist remains the same: profit; profit for Atari and Activision, profit for the countless other companies who had gone from manufacturing kiddie pools to manufacturing consoles in the hope of cashing in on the trend, profit for retailers. Of course, the huge sums of money involved are what make the story of the Crash generally interesting. But at the same time, the money angle is a one-sided account (the rough outline of which I sketched above). A broader account that includes non-official sources, i.e. childhood memories from yours truly, paints a different picture, one that challenges the generally accepted story on several points.
I got my Atari 2600 in 1986. 1986? That's right, three years after the video game crash supposedly made the situation in the US similar to the current situation in China (where consoles are banned). And I loved my 2600. I'd play it all the time. My neighbours and friends to this day, Mike and Greg, would come by to play my 2600, then I'd go to their place to play Donkey Kong Jr. on their Colecovision. Again, in 1986. And our enthusiasm had surprisingly little to do with the actual games: for us, those consoles meant the giant leap from not being able to play games on a TV to being able to play games on a TV. Firing up an emulator today, it's easy to concur that there were terrible games... but to an 8 year old in 1986, the world of difference separating E.T. or Pac Man for the 2600 and not being able to play games on a TV was incomparably greater than the relatively minor (the Atari 2600 was very primitive) differences in quality between Chase the Chuckwagon (A game about dog food published by Purina) and Frogger (a decent port of a good game). And that's usability. I didn't know the pixelized adventurer in Pitfall was named "Pitfall Harry", or even that Mike and Greg's Colecovision was much more powerful than my Atari 2600. It was all just video games, a fun, novel way to spend the tons of free time we had.
And this state of indifference, of playing video games because they were something new and because as such, they had an immediate appeal to our young minds, continued well through the era of the NES, that is, the system that supposedly brought the "dark ages" of the crash to an end and sent video games on the path to the glorious, multi-trillion dollar future that awaited them. James Rolfe, the Angry Video Game Nerd, is the author of a series of videos that presents a fascinating, game-by-game analysis of the terrible games we played throughout the NES era. And by "played", as James makes abundantly clear, I certainly do not mean – as in many generic tales cited in accounts of the Crash – that we played these games for five minutes, realised they were junk, and threw them in the trash. No, we actually sat down and tried to play through these horrible abominations of mankind: Dr. Jekyll and Mr. Hyde, Ghostbusters, Fester's Quest...
Instead of a climactic arc with a dramatic crash ending in miraculous rebirth, therefore, the actual, lived history of the "Crash" is one of continuity for many people my age. So why is this angle, which for many people is the only one that actually affected their relationship towards video games (kids don't know what share prices are, or at least they didn't in 1986) systematically ignored? Watch any E3 press conference, go on any gamer forum and the answer soon becomes clear. When the NES ended the "Crash", that is, when it made video games attractive to capital, what it did that mattered was take the first step towards molding the loose, ad hoc cultures of usability that had taken shape around video games since the time of Pong into profitable cultures of identity closely managed from corporate HQ. Already with the 16-bit era, supporting a console meant, ipso facto, supporting and identifying with, from bottom to top, the organisation that made it: its supply chain, its board, its advertising and PR departments (hence the cult following that's sprung up around Sega's advertising)... and of course its business results. Today, it's not uncommon for arguments among gamers about a particular console or game manufacturer to feature Q4 data from said manufacturer; similarly, it's CEOs (as opposed to people actually involved in making the games) that take center stage at E3, to the uproarious applause of legions of fanboys. It's a situation that, I can imagine, works out well for game manufacturers (and their shareholders), who are constantly thinking of new, legally questionable ways to "lock in" players' wallets. (It is interesting to note that the next generation Xbox and Playstation consoles will be designed so as to prevent used games from being played, thus shutting down another culture of usability, that of the exchange and rental of used video games).
Twenty years from now, we'll probably be telling the same tale about Facebook. The purely fiduciary slump Facebook is now in will be retrospectively reworded to imply that we the users were in fact dissatisfied with Facebook before it started charging us. Once a new pay-to-play version comes out (probably as a "free" feature of a pay-to-play service like Xbox live or Apple TV), it will be outwardly recognized as superior from the perspective of the user and, less outwardly, as assuring for the investor in its focus on brand identification as a basis for added value.
So there you go, Mark. If you aspire to be a trillionaire, convince me I love Facebook more than I love my friends.
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