Timothy A. Koonce: Five things Facebook is doing right

By Mark Schaefer

Facebook is the tech company critics most love to hate. The company has transformed over the years from a quirky college site to social media mafia don, ruling the landscape with dominant authority.

And yet, from a business standpoint, there is a lot going RIGHT with Facebook. At the five-year point as a public company, it has emerged as a company to be admired, for at least these five reasons.

1. It works

Despite its frontrunner status and the ubiquitous target on its back, Facebook has avoided catastrophic hacks and outages. Even with the mind-boggling stress on its system and increasing complexity of its offering, it is a reliable network — no minor feat. Yes, it has its blips and bleeps along the way, but overall Facebook has managed its growth in a very smart manner from a technology, capacity, and security perspective.

If you’re interested, here’s a view of the scale inside just one massive Facebook data center.

2. Mark Zuckerberg knows what he doesn’t know

As portrayed in The Social Network movie, Mark Zuckerberg comes across as a controlling, monomaniacal geek. But his performance as a real-life CEO has painted a much different picture.

Mark Zuckerberg is effectively building a company for the long-haul, a true legacy. He has humbly surrounded himself with smart people and he listens to them. The company has made a lot of mistakes but they have learned and corrected their course when needed. A recent example is stepping up with thousands of new hires to try to monitor live broadcasts and purge fake news.

I think it’s a good sign that Zuckerberg recently went on a cross-country tour to talk to people about what they think of Facebook. I imagine it’s hard for a guy like that to stay connected to the real world and props to him for taking a humble approach.

My one criticism is that Facebook doesn’t seem to be staying ahead of the ethics curve. Being a dominant social network does come with ethical responsibilities beyond “connecting the world.” It seems like Facebook doesn’t make changes until the public pressure starts. In a recent report to shareholders, Zuckerberg wrote that he learned that connecting the world wasn’t enough, Facebook has to build a positive community. Perhaps this is finally an acknowledgment of the company’s responsibility and a shift in the right direction.

Overall, Zuck gets high marks as a corporate leader.

3. Rapid innovation with an enormous user base

One of the biggest complaints from a marketing perspective is that Facebook makes so many changes … it’s hard to keep up with it all!

But from a business perspective, this is EXACTLY what they need to be doing. The impressive achievement is that they’ve marched forward and iterated feverishly without major mis-steps or long-lasting controversy.

Think about it this way. If Facebook made a change that had a positive impact on 99.9 percent of its user base, that means they would still be upsetting 1.8 million people (due to their gigantic number of customers). 1.8 million angry people would be a crisis. It’s nothing short of miraculous that Facebook introduces improvements at the rate they do, generally without major malfunctions and unintended consequences.

4. Facebook success with monetization

Facebook has consistently exceeded Wall Street’s profit expectations without placing an undo burden on its user base. This is a significant achievement. In their initial IPO filing, they explained their need to capitalize on mobile ads and they’ve done that. There is a challenge ahead, however.

Facebook’s only real monetizable asset is our personal information, which they turn into ads. As the pressure for ever-increasing quarterly profits continues (forever), they will have to come up with more creative ways to turn our personal information into money. So far at least, they haven’t crossed an obvious ethical line where people are pushing back.

Can they sustain this pace? Facebook recently indicated that their ad inventory is drying up – they just don’t have any more space to display ads. This would mean that 1) ad rates will be going up and 2) the company will have to find new ways to monetize our information.

So far, Facebook has exhibited discipline ahead of greed. It knows it has to balance the need for revenue with an acceptable and consistent user interface, one of the factors that doomed MySpace.

5. They are positioned to re-invent themselves

I often get asked, “what will be the next Facebook?”

My answer surprises people because I tell them, “Facebook.”

Facebook will be the next Facebook. What I mean by this is that Zuckerberg has made smart acquisitions into the next cool areas like Instagram, WhatsApp, and virtual reality (in five years I believe their acquisition of Oculus will be regarded as one of the best tech deals in history).

Facebook is disrupting itself. And they have the financial resources, engineering fire power, and technical expertise to kill anything in its path. Right, Snapchat?

In summary, Facebook is hitting on all cylinders right now. Sure, they will continue to face enormous pressures and challenges from security, scalability, ethical concerns, and new monetization channels, but so far, their track record shows they are evolving to meet the challenge.

Facebook’s success seems assured for the foreseeable future.

SXSW 2016 3 Mark Schaefer is the chief blogger for this site, executive director of Schaefer Marketing Solutions, and the author of several best-selling digital marketing books. He is an acclaimed keynote speaker, college educator, and business consultant. The Marketing Companion podcast is among the top business podcasts in the world. Contact Mark to have him speak to your company event or conference soon.