George Magazine

HARD TO DO. LARS GROEGER, LECTURER IN MANAGEMENT (MARKETING), MACQUARIE GRADUATE SCHOOL OF MANAGEMENT BREAKING UP IS Facebook relies on a model whereby it woos customers and then hopes they find it too much of a hassle to shift to another platform. "It's about creating high switching costs," Lars Groeger says. "They entangle you." So even if superior rivals emerge, he believes Facebook has such a strong brand and market coverage that many users will stick with it. "How much better does another [provider] have to be so that I will go and move all the pictures, all the comments, all of this and that to a different platform? That's why I think Facebook is in it for the long run." Groeger adds that one of Facebook's commercial strengths has been that, unlike early rival Friendster (which is now a social gaming site), it has encouraged users to provide real names rather than fake IDs. That means the consumer data drawn from Facebook is of significant value to corporate brands. However, Facebook's push to turn its popularity into profits comes with dangers, Groeger warns. He questions a controversial pay-to-post service that allows people and businesses to ensure their Facebook updates are seen and attract 'likes'— for a price. "It basically dilutes the brand of Facebook … and if they lose the trust of the customer base then it can go down quickly." >> but most of those ads are designed for personal computers, not mobile devices. Despite having a number of opportunities to take the money and run, Zuckerberg has resisted takeover offers and pledged to stay the course. Papworth explains that such single-mindedness is common among entrepreneurs in community- hosting entities such as Facebook and far less common with pure technology businesses. "Community hosts tend to have a vision for something they want to build for humanity, so they will see it out. They're really the old-school Rupert Murdochs in new dresses. I don't ever see Rupert laying down and saying, 'Well, I've done my thing and now I'm going to retire.' It's just not part of his culture to do that. And Mark's the same." Jeffrey Cole, director of the Centre for the Digital Future at the USC Annenberg School for Communication & Journalism in Los Angeles, says the Zuckerberg story is compelling from a social and business viewpoint. "We still love the image of a geeky Harvard undergrad who rises to create something that changes the world." Cole agrees Zuckerberg has never been motivated by money. "He grew up wealthy and what attracted him to Facebook was the power to change the world; first his social world and then all the world." Cole contends that, even today, Zuckerberg cares little for the financial ramifications of Facebook's share price slide, save for the impact it has had on employees with shares and perceptions about the company. "It seems clear the stock was overvalued and a lot of people were rooting for it to fail. Whether he ultimately made the right choices we will not see for another year or two." Even with so many Facebook users, the challenge now for the business model is to keep that audience while drawing more money from mobile users. Share price woes notwithstanding, Papworth says CEOs around the world can learn from Zuckerberg's control of the Facebook offering and brand. She notes that past criticism by Facebook users of an unpopular news feed prompted Zuckerberg to tell members to 'chill out'—the feed was staying. "He absolutely owns the brand and he won't even let the customers impact it." george.facebook 10

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