Facebook’s last chance

Facebook has had a year riddled with scandals surrounding user data and the spread of false news on the platform, reminding of its great significance in the world today. However, what could be more crucial to Facebook’s future success is how it adapts to the underlying change in modern communities.

What makes companies like Facebook so valuable are the vast audiences they are able to gather to their platforms. One of Facebook’s initial successes was to realize the value of networks: The early rollout was limited to universities, building on existing networks of students. When the website was made available to everyone, it could build further around networks consisting of family members, co-workers, friends and so on. As the platform kept growing, new communities were built organically around things like local recycling circles, flea markets, hobbies and

The problem is, Facebook is increasingly losing its relevance among young users. In the United States, its most profitable market by average revenue per user, it lost 2.8 million users under the age of 25 last year. So far, Facebook has tried to brush off investors’ concerns by exhibiting promising growth in daily active users on Instagram, and ramping up efforts to further monetize it. Instagram might even become more profitable than Facebook in a few years.

Facebook’s future relies upon creating a sense of community among its users. The nature of communities is changing with urbanization and globalization, which create an increased demand for tools to help people to find meaningful connections.

Social media is mainly built around three kinds of communities:

• Location-based
• Organization-based
• Identity-based

Location-based communities are increasingly losing their significance, as identity-based communities become more accessible and therefore more desirable. When people go online, national identity is less significant than common interests and contemporary online culture. Organization-based communities in turn have mostly moved to group chats and organization-wide tools such as Slack and Skype, making the newsfeed even less interesting.

Facebook is well aware of the value of communities, to the extent that in 2017 Mark Zuckerberg published a manifesto outlining a vision for a “global community” built around his product. As the newsfeed became saturated with information — an inevitability for all growing social media platforms — Facebook started to shift its attention to Groups, which had grown significantly. In 2017 Facebook organized a “Communities Summit” in Chicago to coach group administrators and to share insights. A European summit was organized in London this year.

In the longer term, extracting revenue from Instagram for growth in the parent company will not be enough to save Facebook. In July this year, the company lost $120 billion in market capitalization in one day after missing the market’s expectations in the second quarter. A mounting problem Facebook needs to solve is how to survive an eventual decrease in Instagram use. Instagram has started to tackle saturation using the Facebook playbook: going from a chronological to an algorithmic feed (newsfeed) and by encouraging users to create lists of close friends to share stories with (groups).

In fact, Facebook has already made some efforts to prepare for this future, cleverly using the currently underused networks remaining on Facebook to spin-off new standalone products. The first new product was already released in 2011, when Messenger was launched as a standalone app on Android and iOS. In 2016, Facebook released a standalone Events app, which was later rebuilt and renamed Local in 2017.

Facebook’s efforts to revitalize the networks of its main platform hit a new gear this year when it announced that it’s building a dating app. According to TechCrunch, Dating will be a feature inside the main Facebook app, and will give users the opportunity to give access to data such as events and groups to show other people who have done the same.

While the new apps may look like they are made to cater to a location-based community, they are fundamentally built around identity-based communities. On Local, events highlight friends who are attending, thus reflecting a common interest. Suggested events help users to find events where they could meet new friends who share their taste. Dating also helps people to connect with others who have something in common.

Facebook’s latest endeavors are clearly aimed at the changing community landscape. It needs to be the leading platform to serve growing urban and identity-based communities around the world to survive. Monetizing messaging apps is not enough to justify a $450 billion valuation. So far, Messenger and WhatsApp have failed to become the WeChat of the world outside of China. If Facebook’s strategy of tapping deeper into emerging communities becomes unsuccessful, it’s going to face serious questions about its long-term sustainability.