Facebook launched as a public company in 2012, immediately after its launch the stock price sunk.
Users were starting to ‘go mobile’. To access Facebook predominantly through their smartphones.
That seems strange now, but remember for the first half a decade or so Facebook was a social networking site that people nearly exclusively used via a web browser.
This shift to mobile was a big problem because Facebook had no tools for generating revenue from mobile users. It’s revenue came from web-based advertising. Zuckerberg and Facebook put together a team whose job it was to take the platform mobile. They had to figure out how to make Facebook a ‘mobile-first’ company in a profitable way. Until about 2013 many observers were not sure that Facebook could make this transition. There was the possibility that some other natively mobile platform might rise up in their place.
That’s not what happened, Facebook have clearly transitioned to mobile successfully. How did they do it?
Let’s chart this story, not just because it tells us some important things about the becoming mobile of media. But also because it illustrates how media platforms operate as engineering projects. They are never static or stable, they are always in the process of imagining and inventing the next version of their infrastructure.
This makes them radically difference from the media institutions of the twentieth century. For all the ways that television came to saturate everyday life in mass societies, as a technological form it changed very little. It remained, more or less, a box sitting in the home that you turned on or off, selected from a number of channels, and viewed professionally-programmed content.
In the ten to fifteen years that media platforms like Facebook have been with us they have re-engineered their infrastructure in significant ways multiple times.
Try to imagine Facebook without a News Feed. Maybe you were never even a user before the feed. Back then, it was more like MySpace, or an online dating site, in that individual user profiles were the organising point of the network. When you logged on you were placed at your personal profile page, and went from user profile to profile. There was no feed that aggregated recent content produced by everyone in your network. You only knew if a friend had posted some new photos if you went and checked their actual profile.
Facebook realised this was a problem because they couldn’t manage user engagement with the site. This also made serving advertising content difficult. MySpace ran into this issue too, where advertising began to clutter profile pages or appear as interstitials between page loading – disrupting the user experience. This problem killed off MySpace. Facebook thought if they could develop a feed of content they curated, and then refine it over time, they could learn to serve users content that would keep them engaged with the platform more often and for longer periods.
Rather than us navigating our way randomly around the network, Facebook would use the News Feed to predict and program our engagement with it. Users were initially not happy about the new feed. The News Feed has been at the heart of the Facebook experience for ten years now. That means it has ten years of data about users it can use to shape what they see.
The News Feed gave Facebook greater control over user engagement, which was crucial, and it would also prove to be critical to solving the problem with their mobile advertising revenue.
I wonder how many hours of scrolling in the feed it has on me? Facebook says it captures, on average, 50 minutes of our attention each day. Over ten years that’s more than 3000 hours of time Facebook has monitored our habits, preferences and interests.
The News Feed began to increase engagement with the platform, but Facebook’s value was still limited by the fact that they had very low click through rates on the advertisements that appeared on the right hand side of the browser interface. While Facebook had the capacity to customise the targeting of ads to individual users based on data it collected about them, the value of this was decreasing because users never clicked on the ads.
Once it became a public company, Facebook's advertising model came under significant scrutiny.
Advertisers didn’t really value these ads as a media property because it couldn’t offer strong user engagement. And, the problem was made worse because these ads were not visible on the mobile app at all. At the start of 2009, Facebook had 20 million users on their mobile platform. By 2010, they had 100 million mobile users. There was rapid growth in mobile use with the penetration of smartphones and large mobile data plans. Early versions of the mobile app had fewer features than the desktop version and the app was notoriously slow to load and scroll. Still users kept going to the mobile app for convenience over the desktop site and Facebook was forced to catch up.
By 2011, 430 million users were mobile, making up 50% of daily engagement with the platform. So, before Facebook even launched as a public company, mobile had become a critical strategic issue. They needed to figure out how to make the mobile app work seamlessly and how to get most of their revenue from it.
When Facebook went public in 2012 its user base was 60% mobile but they could make no revenue from any of this mobile engagement. Think about that, in 2012 Facebook could not generate a single dollar from 60% of their user base. Facebook was also under threat form emerging mobile-first platforms like Instagram. When they bought Instagram for $1 billion in 2012, they were making a strategic play. Instagram had been siphoning off users from Facebook, and they needed them back. But, Instagram brought another version of the mobile problem. It had no advertising model and therefore made no money.
Both Facebook and its new acquisition Instagram had to work out how to generate value from their mobile apps. The answer was to develop a native advertising model, something that had never been done at scale before. A native model weaves paid advertising into all other content on the platform. Rather than have the ads appear separately on the side, they would flow through the News Feed or Home feed along with everything else. Facebook had to figure out a way to integrate advertisers’ content into the everyday flow of the News Feed.
In 2012 Facebook launched promoted posts in the news feed, and over the past several years these have become the backbone of Facebook’s revenue. Today more than 90% of Facebook advertising revenue comes from native content integrated into the News Feed. Creating the News Feed was the first step in ‘natively’ integrating advertiser content into the platform.
The news feed uses algorithms and data analysis to determine the right ‘balance’ between selling the attention of users to advertisers and maintaining their ongoing engagement with the platform. Too much irrelevant paid content and you’ll stop using Facebook. Not enough and the platform doesn’t make enough revenue. Facebook finds the right balance for each user via complex data analytics.
Once this native model was working revenue started to flow from the mobile user base and Facebook’s share price started to recover. In solving this major strategic problem Facebook also dramatically reshaped the whole media system: it invented a model of native advertising that worked at scale. By 2013, Facebook’s user base was 80% mobile. Users were using Facebook and Instagram more often in more places. This offered the platforms more points of data and opportunities for engagement.
The platforms could ‘auction’ an expanding array of moments from our everyday life to advertisers, increasingly based not just on who we are, but also where we are, who we are with and what we are doing. The becoming of mobile media is associated with the intensification of the amount of our daily lives which can be made visible to media platforms. By 2013 the business press started to acknowledge that Facebook solved their mobile problem, and therefore established themselves as a durable platform in the media landscape. By 2014 50% of Facebook's revenue came from mobile. By 2016 Facebook was 90% mobile and 85% of its revenue came via promoted posts in the mobile app.
Facebook’s re-engineering of its platform does not stop. The platform has begun to experiment with integrating shopping into Pages, Profiles and News Feeds. At the 2017 F8 developer conference Mark Zuckerberg presented a vision of what Facebook looks like after the smartphone.
The answer, he says, is augmented reality. Living in a world where our immediate view of reality is overlaid with digital simulations.
You look into your bedroom and see what your bed would look like with a new bedspread you are thinking of buying.
You walk past a bar and see in the window a video and review from a friend when they went there.
You have a packet of muesli on the kitchen bench while you are having breakfast, you see a person leap out of the package and stand on your kitchen bench staging a demonstration of the farm when your muesli is made.
Facebook are imagining forms of consumption that are even more natively woven into our experience.