How Facebook Used White Space To Crush Myspace

from the knowing-what-you-know-now dept

Wed, Jan 19th 2011 1:45pm — Ross Pruden

Mike talks a lot about disruptive innovation, about how -- despite all outward appearances -- newcomers can compete and even usurp the establishment (which are also called "entrants" and "incumbents" by Clayton Christensen). The examples are plentiful: Microsoft Money was outfoxed by Intuit's Quicken, Nike's pre-loaded iPhone app was leapfrogged by RunKeeper, Blockbuster was run into the ditch by Netflix, Kodak was surprised by the swift adoption of digital cameras... the evidence shows again and again that the size of the company and vastness of its resources do not necessarily guarantee its market dominance.

Gerd Leonard tipped me off to a great Forbes article by Adam Hartung called How Facebook Beat Myspace. For anyone who used both of those social networks, the grievances against Myspace are easy to list: too many ads, irrelevant ads, poor programming leading to browser crashes and typographic eyesores, letting users customize their profiles to such a degree that profile pages would either take too long to load (because of 50+ 10MB images) or the colors were simply too garish to view without getting a headache. Myspace, for all its fantastic social networking tools which had been hitherto unavailable, still had serious design flaws, and Myspace users saw Facebook as a better run and cleaner social network. That's why we all migrated.

Hartung bypasses the banalities of the user experience to examine the differences in business management approaches at Facebook and Myspace. He begins by rewinding the clock to remind us just how popular Myspace was at the peak of its success. If you remember, Facebook was a total nobody at that time. And then, something went awry... a change in the wind:

What went wrong? A lot of folks will be relaying the tactics of things done and not done at MySpace. As well as tactics done and not done at Facebook. But underlying all those tactics was a very simple management mistake News Corp. made. News Corp tried to guide MySpace, to add planning, and to use �professional management� to determine the business�s future. That was fatally flawed when competing with Facebook which was managed in White Space, letting the marketplace decide where the business should go.

"White Space" is a relatively new management term that Hartung advocates in his book, Seizing the White Space. Wikipedia describes White Space as the area in a business' hierarchy that exists between functions within the hierarchy, much like the unused space in your kitchen cupboard. White Space is the "handoff between functions where misunderstandings and delays occur", where "things often fall between the cracks or disappear into black holes". Hartung also calls White Space "a location for new thinking, testing and learning" in order to "evolve new formulae for business success free from the existing Defend and Extend culture."

Hartung then offers up the meat of his argument -- that Facebook conquered Myspace not because Facebook offered better features, but because it looked to its users for ideas and then created those features:

...the brilliance of Mark Zuckerberg was his willingness to allow Facebook to go wherever the market wanted it. Farmville and other social games -- why not? Different ways to find potential friends -- go for it. The founders kept pushing the technology to do anything users wanted. If you have an idea for networking on something, Facebook pushed its tech folks to make it happen. And they kept listening. And looking within the comments for what would be the next application -- the next promotion -- the next revision that would lead to more uses, more users and more growth.

And that's the nature of White Space management. No rules. Not really any plans. No forecasting markets. Or foretelling uses. No trying to be smarter than the users to determine what they shouldn't do. Not prejudging ideas so as to limit capability and focus the business toward a projected conclusion. To the contrary, it was about adding, adding, adding and doing whatever would allow the marketplace to flourish. Permission to do whatever it takes to keep growing. And resource it as best you can -- without prejudice as to what might work well, or even best. Keep after all of it. What doesn't work stop resourcing, what does work do more.

Contrarily, at NewsCorp the leaders of MySpace had a plan. NewsCorp isn't run by college kids lacking business sense. Leaders create Powerpoint decks describing where the business will head, where they will invest, how they will earn a positive ROI with projections of what will work -- and why -- and then plans to make it happen. They developed the plan, and then worked the plan. Plan and execute. The professional managers at News Corp looked into the future, decided what to do, and did it. They didn't leave direction up to market feedback and crafty techies -- they ran MySpace like a professional business.

And how'd that work out for them?

The tendency to plan for any daring enterprise is irresistible, and critically necessary in many cases. But Hartung's point is that innovation is a different beast from other types of business management. When you choose to innovate clever, competitive solutions to new market conditions, you have to be open to the possibility that you might create a newer business model that cannibalizes or "devalues" your current product or service. And so we arrive at the so-called Innovator's Dilemma -- do you tear down the walls of your temple to build a better temple? Or do you let someone else tear down your temple so they can build a better one? When you're an incumbent business like Nike, Microsoft, Blockbuster, or Kodak, you probably have so much financial investment in your legacy business model that you would rather turn a blind eye to all those young upstarts who seem to understand the market much better than you. After all, you have the experience, and they don't, right? Your staff went to Harvard and Duke and Stanford, right? Aren't your Excel spreadsheets of ROI projections your best protection against unexpected market reversals? You've produced 100 movies and they haven't, so what could these whippersnappers possibly know about the business of filmmaking?

Planning is of course essential for many parts of business but, Hartung notes, you really can't plan what people are going to respond to the most, and Zuckerberg understands that at a fundamental level. I once read an interview where the reporter noted how Zuckerberg constantly asks his colleagues, "Knowing what you know now, what would you do differently? And how do we get there?" This explains why Facebook revamps their site every six months... but also why Facebook continues to compete (and very effectively) with looming competitors like Twitter. (In passing, Netflix has also thrived from constant experimentation and listening to its users. Consequently, new features pop up on Netflix all the time that improve their service... and customers remain loyal because of that.)

But this point should not be glossed over. At the heart of Facebook's success is Zuckerberg's willingness to "destroy" Facebook to make it better and more competitive. Facebook was once the entrant, and now it is the incumbent and will stay the incumbent for as long as Zuckerberg retains the attitude of an entrant. Incumbents face a choice of abandoning much of their expensive infrastructure to adapt to a changing market, whereas entrants face no such choice -- quite the opposite, entrants have nothing to lose. They can try anything. Facebook crushed Myspace because Zuckerberg was focused on growing the user base by providing the things users asked for, rather than only providing the things that would grow the company's bottom line. Zuckerberg's second question, "How do we get there?" illustrates how he's constantly experimenting and building bridges from new and radical ideas to the current and static ideas. Myspace, being too preoccupied with planning, ROI, etc., never fully understood how important adaptability was to their business model.

Hartung concludes with the most important point of all:

MySpace demonstrates a big fallacy of modern management. The belief that smart MBAs, with industry knowledge, will perform better. That "good management" means you predict, you forecast, you plan, and then you go execute the plan.... Big failures -- like Circuit City, AIG, Lehman Brothers, GM -- are full of extremely bright, well educated (Harvard, Stanford, University of Chicago, Wharton) MBAs who are prepared to study, analyze, predict, plan and execute. But it turns out their crystal ball is no better than -- well -- college undergraduates.

There's an element of ego in play here -- legacy businesses are rarely humble enough to admit they can still learn from the newcomers, and that's to be expected. It's a convenient reaction to view emerging market developments as fads, gimmicks, or flavors-of-the-month and, as such, unworthy of diluting the company's resources by devoting extra time, money, and energy to research them. The fact is that many of these "fads" might very well be a waste of time and resources. By next year, they may have come and gone. And yet entrants view these "fads" with an open mind, and choose to tinker endlessly with them until the market reacts favorably to one of their experiments.

If anything, Myspace's spectacular failure underscores exactly how important it is to listen to others regardless of their experience or educational background. Yes, of course, experience is a factor in lending weight to someone's ideas, but good judgment is an equally important factor, if not more so. You needn't have had any experience producing horse-drawn carriages to make a sound judgment about how obsolete horse-drawn carriages would be with the coming automobile.

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Filed Under: competition, innovation
Companies: facebook, myspace

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Nick Dynice (profile), 19 Jan 2011 @ 1:58pm

Wow, great post. That is all I can say. Nothing to add.
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Anonymous Coward, 19 Jan 2011 @ 2:02pm

Who cares
Online 'social networking' is a waste of time. Anyone I care about I talk to IRL. Facebook is a haven for self-absorbed narcissists who have nothing better to do.
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Anonymous Coward, 19 Jan 2011 @ 2:06pm

Re: Who cares
Also why is Facebook worth $50 billion despite only generating $800 million in revenue in 2009?

This is exactly the same type of on-your-knees adulation we saw for a thousand similar companies during the dot-com burst.

For all the hot air wasted on Facebook, you'd think they're actually accomplishing something worthwhile.

I don't see it.
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Mike Masnick (profile), 19 Jan 2011 @ 2:09pm

Re:
Wow, great post. That is all I can say. Nothing to add.

I liked it too... which is why I published it. :) Though, I'm not sure I totally agree with Ross' (and the original author's) view on "white space." That seems too much like a term made to sell a book, and seems like the sort of thing that can be determined only in retrospect.

I'm also not sure I agree with the claim that Facebook listens to its users. There are many indications that it often does not do that.

However, the overall point: that companies with the greatest advantage on paper don't always win, is a really important one.
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Dark Helmet (profile), 19 Jan 2011 @ 2:10pm

Reminds me...
Of some research I did for a book on artificial intelligence. I kept coming across one developer after another saying that for those trying to create true artificial intelligence, emerging behavior was ALWAYS better than programmed behavior, because it meant your AI was "living and breathing".

Isn't this similar? It seems that the whole idea behind white space is giving your business creation room to breathe and adapt. Allowing it to do so seems as though it will almost always conform itself directly to the wishes of users, or the market. So isn't emerging innovation in the white space ALWAYS preferable to planned innovation?
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misterdoug (profile), 19 Jan 2011 @ 2:11pm

I blame Murdoch
Rupert Murdoch runs News Corp like a William Randolph Hearst or a Henry Ford. It's a very traditional 1930s-style company, with one man at the top determining all policy and making all major decisions. As long as that man is able to adapt to changing conditions everything is fine and he's a hero. But when he finally runs out of luck and his response is to blame the rest of the world, it's called "the end of an era."
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Josh in CharlotteNC (profile), 19 Jan 2011 @ 2:12pm

Also why is Facebook worth $50 billion despite only generating $800 million in revenue in 2009?

Just in case you're not actually being sarcastic... the answer to the question is because the 'well educated Harvard/Stanford/Wharton MBAs' from Goldman Sachs valued it that way.
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Dark Helmet (profile), 19 Jan 2011 @ 2:17pm

Re: Re:
"That seems too much like a term made to sell a book, and seems like the sort of thing that can be determined only in retrospect."

Ooh, Mike, did you maybe miss the whole point on this? It may be true that you can only determine what the EMERGING INNOVATION that occurred in the white space was in retrospect, but that wasn't the point of either article as I read it.

The point was that sometimes the only thing you should actually plan for is to NOT plan for everything. The idea is to set up your business in such a way that it has room to breathe and grow in unforseen emerging ways, and that when you see those emergences take place, you foster them with an enthusiastic push.

Hasn't Techdirt done this itself? When you started this blog, did you forsee commentors sometimes going for humor with enough effect and prevalence that it would make sense to include a "humor" voting button, which would then emerge into a weekend post that in part highlighted those comments?

Or did that emerge on its own and you happened to notice a positive response from the community and acted to foster it?
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Nick Coghlan (profile), 19 Jan 2011 @ 2:19pm

Re: Re:
I actually thought they were going to mean the term literally. The Facebook UI is a decent example of good use of white space to draw attention to the critical elements of the pages.

That lack of customisability also gives the whole site a coherence that MySpace lacked.
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Anonymous Coward, 19 Jan 2011 @ 2:21pm

I disagree with most of this. I don't think people are that deep. It was simply the "clean" look of Facebook that won people over. I was irritated to switch to Facebook from Myspace, because I consider myself a pretty decent webpage designer and liked the freedom of Myspace. But after enduring all of the ugly pages of others and having my friends all migrate to Facebook, I had no choice.

I think Facebook won completely based on the look.
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marak (profile), 19 Jan 2011 @ 2:23pm

Bloody good post! Certaintly makes me think more about my own aproaches to programming and design. Thanks for the effort mate.
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John Doe, 19 Jan 2011 @ 2:30pm

Re: Re:
Many of my family and friends, including myself, are just mere moments from dropping Facebook. Some because it changes constantly and most because they keep trying to open up our profiles. I am a boring guy with nothing to hide. The government, or most anyone else, would look at me for about 3 seconds and move on to something more interesting. BUT, my profile is MY profile and it is my business who I share with. One more attempt to open my profile up and I am out of there.

I can see Facebook imploding just as quickly if they don't pay attention.
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Mike Masnick (profile), 19 Jan 2011 @ 2:35pm

Re: Re: Re:
The point was that sometimes the only thing you should actually plan for is to NOT plan for everything. The idea is to set up your business in such a way that it has room to breathe and grow in unforseen emerging ways, and that when you see those emergences take place, you foster them with an enthusiastic push.

Yeah, I totally agree with that. It just felt like the concept of "white space" is less well defined than it could be.

The point was that sometimes the only thing you should actually plan for is to NOT plan for everything. The idea is to set up your business in such a way that it has room to breathe and grow in unforseen emerging ways, and that when you see those emergences take place, you foster them with an enthusiastic push.

Yeah, I totally agree with that too. I just think that this is one of those things that lots of companies say they do, and it's really only in retrospect that you realize whether or not it's true. You could argue that for years, MySpace had similar flexibility -- early on it left Tom and Chris in charge and News Corp. stayed out of it. And that didn't work.

Hasn't Techdirt done this itself? When you started this blog, did you forsee commentors sometimes going for humor with enough effect and prevalence that it would make sense to include a "humor" voting button, which would then emerge into a weekend post that in part highlighted those comments?

Yes, of course, but again, I think it's a retrospective thing.

I don't know. As I said, I agree with the overall theme: the flexibility, and the ability to react to the market. I'm just not convinced it's as clearcut as this makes it out to be.

In the end, I'm nitpicking on a large point that I think is really strong.
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Jason, 19 Jan 2011 @ 2:38pm

Does nobody remember why?
All of that crap was just crap. Does nobody remember why they moved to Facebook?

The guys all moved because the chicks all moved, and the chicks all moved because MySpace was dirty-creepy-nasty. That, and the name was too danged redundant. Nobody liked saying my m'space.

The MyGration proved that the ladies would rather be virtually poked than to see how many eHoes the fellas were adding to their m'space in hopes of virtually poking them.
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Anonymous Coward, 19 Jan 2011 @ 2:45pm

I thought the message was to keep the users involved in the conversation, not simply having all decisions made from on high, but still having enough sense to provide them with what they want that is workable.

I'm sure the users wanted myspace's customization until it resulted in garish slow to load pages, facebook probably faced the same demands.
It's not about always doing everything you're asked, but rather being willing to listen and respond.
Sounds a little like connecting with fans and giving them a reason to buy.
Now where have I heard that before.
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Dark Helmet (profile), 19 Jan 2011 @ 2:49pm

Re: Re: Re: Re:
"Yeah, I totally agree with that. It just felt like the concept of "white space" is less well defined than it could be."

Hmm, maybe that's the point, though. Stop trying to define everything and just let some things happen. If you trust in your customers to know where they want to go, and you loosen the reigns enough to let them do that, they'll take you there. Isn't THAT the white space?

"Yes, of course, but again, I think it's a retrospective thing."

Right, but the way Techdirt handled it was the point, not WHAT happened. Techdirt was able to take advantage of humorous comments (your welcome ;)) because you allowed it to happen. Conversely, upon seeing those comments at first, you could have put in place a plan to try to push the community to an always serious discussion forum on the topic of the posts, and you would have subsequently lost out on anyone who appreciates the humorous comments and the emergence of one of the weekend posts.

The idea isn't to point back to what happened and say, "See, we we helped make humorous comments a part of the blog". It's to point back and say, "See, look what our community did on its own, and look how our site adapted to what happened as a naturally evolving result".

I think the analogy to AI I posted above is what I'm getting at. Emergent behavior is ALWAYS better than planned behavior....
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Karl (profile), 19 Jan 2011 @ 2:52pm

White space and music
It's a pretty decent article and outlook. I'd just like to point out that it applies to more than social networking sites, or even the internet.

This is always how music has worked. If you look at the real innovations in music, the people that started genres, all of them made their mark outside of the major labels. Then, after they were "disruptive" enough to click with fans, the labels would snatch them up, usually with a good dose of "cargo cult copying" thrown in. (When Nirvana hit it big, almost every single "grunge" band was suddenly offered a label deal, even if they weren't any good.)

Ever wondered why the Top 40 music in this country is so notoriously banal? There you go.

Even the legacy industries should realize that they need the outliers, the "unprofitable," the "pirates." That is where the innovation comes from.

They should recognize that the world outside their walls is their "white space." Instead, they're just building the walls higher. It's a recipe for failure.
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Anonymous, 19 Jan 2011 @ 2:57pm

Almost correct.
Quicken came first, Money was the challenger. Perhaps you mean Mint?

Your friend, Anonymous
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Nick Coghlan (profile), 19 Jan 2011 @ 3:03pm

Re: Reminds me...
The answer is actually a blend of the two. You need enough preprogrammed behaviour to actually get things done right, but the overall *direction* needs to remain fluid enough to adjust to changing circumstances.

Ars have a great article up about this in the context of the StarCraft AI contest:
http://arstechnica.com/gaming/news/2011/01/skynet-meets-the-swarm-how-the-berkeley-overmin d-won-the-2010-starcraft-ai-competition.ars
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Anonymous Coward, 19 Jan 2011 @ 3:11pm

Re: Re: Re:
I thought the same thing. In fact, I will dump websites without proper flow of text and sparse elements (or use element changes locally to my own satisfaction.)

I use neither Facebook or MySpace, but a cursory glance at the design elements of both leads me to showing Facebook as infinitely more readable.
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Anonymous Coward, 19 Jan 2011 @ 3:12pm

Re: Re: Who cares
$800 million is revenue is not worthwhile? Tough crowd...
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Anonymous Coward, 19 Jan 2011 @ 3:13pm

Re:
These the same that valued AOL in the late 90's, when any geeks could plainly see the writing on the wall?
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Anonymous Coward, 19 Jan 2011 @ 3:20pm

Re: Almost correct.
I think he means that a much larger company (Microsoft,) was easily outclassed by a much smaller company (Intuit.) The time of introduction doesn't matter in this case.

The same could be said of the iPhone. Microsoft grossly misjudged the popularity and evolutionary potential for this device, and now they are seeing their lack of judgement in an almost certain reduction of market-share for their main client OS this year below 90%
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johnjac (profile), 19 Jan 2011 @ 3:23pm

Re: Re: Re:
+1
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Kate, 19 Jan 2011 @ 3:31pm

Company Focus?
On day one of training for MySpace's customer care department, our supervisor showed a screencap of a profile page and asked what the most important part of the page was. After a few naive guesses, my inner cynic couldn't stand it anymore, and I earned brownie points by calling out the correct answer from the back: "the ads!"

I can't say what Facebook's official focus is, of course, but knowing that MySpace sailed under false colors, so to speak, might be worth a footnote in its sordid history.
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rosspruden (profile), 19 Jan 2011 @ 3:31pm

Re: Almost correct.
@everyone: Thanks for all the kudos. Much appreciated!

@AC: I take critiques favorably, so no need to be anonymous! :) I did actually mean Quicken, not Mint:
http://www.techdirt.com/articles/20090612/0032535204.shtml

The point wasn't a question of who came first, but who won in the long run and MS Money -- as the larger company -- still couldn't outrun Quicken.

@Mike: Good points. The nuances of White Space are probably described in much greater detail in Hartung's book on the subject, but I'd have to agree that White Space likely wasn't a totally conscious strategy. In retrospect, though, we can see it was a fruitful one and something which can *now* be a conscious strategy. I think that's the real take-home here...
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rosspruden (profile), 19 Jan 2011 @ 3:34pm

Re: Company Focus?
I'd venture a guess that Facebook's ads, though less intrusive, have higher conversion rates. I've clicked on many more Facebook ads because they were more relevant to me, and more clever. I don't think I ever clicked once on Myspace's banner or sidebar ads. Not once.
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Hephaestus (profile), 19 Jan 2011 @ 3:36pm

Re: Re: Who cares
On average in 2009 facebook had ~200 million users. On average in 2010 they had ~475 million users. With in the next 3 months they will pop 600 million users. ~Next year they will break 700 million users.

The $800 million in revenue is on an average of 200 million users in 2009. Thats 4 dollars per person per year. The $50 billion USD valuation is much more recent with 500 million users.
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bdhoro (profile), 19 Jan 2011 @ 3:45pm

The Black Swan (The book, not the movie)
I may have commented on the Black Swan concept enough but it pops back up all over the place.

The relevant point in this post is the idea of experts not being any better than the layman in their profession. The consensus is that the forecasting and prediction industry has no real experts (which is why the book recommends being very weary of economic analysts - but is equally valid for any forecasting).

Forecasters and analysts, (ie those working at myspace) look at the past to determine the future - a mindless task because in fact the past tells us very very little about the future unless we're analyzing extreme amounts of data, like more than 100 years worth.

The problem with the "experts" is they look at all the things that they "know" while completely overlooking everything they don't know (usually because they think they know everything - after all, they are the "experts").
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Dano, 19 Jan 2011 @ 3:54pm

To deep
I think its a much simpler explanation.

Clean look.
The cool club effect thanks to college only at first.
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Anonymous Coward, 19 Jan 2011 @ 4:00pm

Re: Re: Re: Who cares
Reminds me of AOL, except AOL charged $20/month, PLUS there were ads.

There simply is no guarantee that AOL, MySpace, Facebook, *, will ever have a viable future without diversifying their revenue sources. People are obviously finicky and can and will change "social structures" quite rapidly.
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Hephaestus (profile), 19 Jan 2011 @ 4:03pm

White space and FaceBook
@rosspruden - great post.

In the case of Facebook it seems that "White Space" is nothing more than good customer service, and giving the users what they want. Which is what any good business should do. Google did something similar when they branched away from being just a search engine and e-mail, and started building apps.
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Anonymous Coward, 19 Jan 2011 @ 4:03pm

Re: Company Focus?
That explains a lot. From the customers' perspective, the most important part of the page is not the ad, but I would wager the image of the person(s) you are viewing. Perhaps if the customer care department focused on what customers actually were looking for instead of what the company was looking for, it wouldn't have fallen into irrelevance.
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The Groove Tiger (profile), 19 Jan 2011 @ 4:05pm

Re: Re: Re:
I also thought the title meant, well, white space, as opposed to MySpace tons of glittering animated decals of kittens and teen emo vampires.
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YoMamma, 19 Jan 2011 @ 4:54pm

Re: Re: Re: Who cares
Divide the user number by two or three because of all the multiple user accounts opened by the same person for the sake of having "friends" playing Farmville, Cityville, etc. Then, don't count the business accounts where there is very likely also a personal account associated. Then, don't count all the accounts that were taken over, or locked out of... then the user opens another account, etc.

Every time I hear anyone talk about FB, they always bring up the huge numbers of users. I'd bet the real number is way lower.
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Wifezilla (profile), 19 Jan 2011 @ 5:09pm

Going to Myspace was like walking in to a teenager's bedroom. There was obnoxious music blasting at you and you couldn't find the button to turn it off, there were ugly posters and pictures everywhere, you couldn't read the text through all the garbage, and if you could every other word was 4 letters and ended in "UCK". All that was missing was the smell of dirty laundry and bong water.

Myspace lost because even parents of teenagers have no interest in hanging around a teenager's room for more than a few seconds IRL. Why would people want to recreate the experience digitally?

With Facebook, I can communicate with my 4 year old nephews, my 22 year old son in Iraq, or even my 80-something grandmother.
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Trav, 19 Jan 2011 @ 5:19pm

Adds
Rule One, When you use the internet, never EVER EVER!! click on any add!!,
2) That girl from Russia or Thailand does not think you are really hot at all!!
3) you are not the one millionth visitor you won NOTHING!!
4) Do not ever pay for a program to fix computer problems or Viruses. There are always freeware ones available that are often Better.
5) That housewife did not make $1500 a week on her computer

I could go on and on
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Kenny, 19 Jan 2011 @ 5:25pm

That's how Google did it
Kind of makes sense really, it was Google's clean search engine that basically killed Yahoo, MSN and all the others. Microsoft and Bing basically haven't learned that lesson yet and are still fumbling around at the bottom of the search market share.

Facebook will not last though, give it another 5 years at the most.
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Luke, 19 Jan 2011 @ 5:30pm

User Created Features?
User Created Features? Millions of people who hate the new Facebook profiles, privacy concerns and data control would disagree with this comment.
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Stefan Youngs, 19 Jan 2011 @ 5:34pm

The 'Concept' of White Space
A superficial analysis, to put matters at their kindest. The idea that customers determine your business MAY apply to something as ultimately trivial as a bit of programming that allows person A to bore universe B, but do you imagine for one moment it could apply to any serious endeavour where products can take years to develop and then sell? Fact is, the deciding factors on what determines your final product are often beyond the comprehension (or interest) of the final customer. Should it be titanium or aluminium? CMOS or something else? As the manufacturer you make the best decisions you can along the road and, if it all adds up in the end, you have a success. That's not to say customers don't, in the end, decide if you get a thumbs up or down, they often do, but you can't keep checking on their needs, and re-doing your work to reflect current opinions, through a years-long development cycle.

Trivial endeavours like Facebook or Twitter sometimes hit explosive growth simply be existing at the right place and time. They often vanish when their time is gone. Maybe being fleet-footed is a huge benefit during their brief lives, but to generalize this into substantive businesses is a stretch.
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Luke, 19 Jan 2011 @ 5:35pm

Re: Adds
+1 on Rule One. There is NO acceptable reason to click on ANY ad. Even if the product interests you, Google it.
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Johnny, 19 Jan 2011 @ 5:41pm

Re: Re: Re: Who cares
$50 billion for $800 million in revenue is ridiculous. Revenue is not profit remember, it's total sales.

This is 62.5 times revenue, and if profit is 5% of revenue (guessing) it would be 1250 times their profit. Normal companies are valued at somewhere between 10 and 40 times their profit or 1 or 2 times their annual revenue.

High multiples can only be justified by expected future growth (exponential in this case).

However the world population is limited, and the active internet population is limited even more. My guess is most internet users who would consider to be on Facebook are already on Facebook. So where's the growth going to come from? Exponential growth in new users is just not sustainable beyond maybe 2 or 3 times what they have now. Certainly a far cry from 62 times more. Increasing revenue per user is going to be very hard without alienating them. More ads? 62 times more? unlikely.

Selling their users private data is also unlikely to raise revenue by a factor 62 and could backfire in a major way.

Maybe they could use Facebook to push other businesses, but even there I don't see how generating 62 times more revenue would be attainable.
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Nick Dynice (profile), 19 Jan 2011 @ 6:35pm

Re: Re:
I think the Facebook staff figures out what users want before they even know they want them. They make big changes, there is a big revolt, and then it dies down and the new features are praised. Less confident service providers would be too afraid to make big changes.
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Nick Dynice (profile), 19 Jan 2011 @ 6:56pm

Coining terms to sell books? Is that only ok when Christensen does it? Streisand Effect? Masnick's law? Approaching Infinity? Sure, these were emergent ideas. But who is to say white space was not. Christensen sites a book in one of his books' bibliography called Seizing the White Space. If Christensen has endorsed a term, I think it is ok. I think this is the same idea as the one discussed in Blue Ocean Strategy. It is a timeless topic worth repeating. Come on Mike, don't be a hater.
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teka (profile), 19 Jan 2011 @ 8:21pm

just going to second or third what others seem to be saying.

When i heard "white space" it made me think of the actual white space on the page.

clean orderly design i can see, nebulous company policies are harder to make decisions on.
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Anonymous Coward, 19 Jan 2011 @ 8:59pm

All I could think of was that this guy must have spent some time around Chris Anderson. Spot something that is already happening, give it a name, and jump in front of the bandwagon.

He should have come up with a better name, as I too was thinking about blank space on a website, not the blank space in an organization.
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velox (profile), 19 Jan 2011 @ 11:30pm

Re:
" Facebook worth $50 billion ... because the 'well educated Harvard/Stanford/Wharton MBAs' from Goldman Sachs valued it that way.
Would these be the same guys who have been hawking mortgaged backed security bundles and derivatives to pension fund managers with the express purpose of using these tools to hide their extreme risk.

Just because some smart Ivy-leaguer is selling doesn't mean you're getting your money's worth.
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stefan youngs (profile), 20 Jan 2011 @ 12:46am

Goldman Sachs Valuation
If Goldman Sachs says Facebook is worth $50 Billion and offers to cut you in a deal to acquire a part of this venture, the best advice to you would be check your Rolex wrist watch is still on your wrist, put your hand firmly on your wallet and run out of the room as fast as you can. Get to the nearest Starbucks, sign on to all your bank accounts and change all your passwords IMMEDIATELY.
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stefan youngs (profile), 20 Jan 2011 @ 1:06am

Re: That's how Google did it
I can't agree Bing doesn't offer a clean interface. It really is minimalist and highly effective for it.

And its results pages are (thankfully) clear of advertising altogether.

I never thought I'd see the day when I congratulated Microsoft on achieving a pleasing, uncluttered user interface to anything, but credit where credit's due.
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stefan youngs (profile), 20 Jan 2011 @ 1:14am

Re: White space and FaceBook
Let's not get carried away here. Google's sole purpose is to generate ad revenue. ANYTHING it offers has the objective of providing yet more avenues for thrusting ads down our throats. It's got nothing to do with Customer Service, a concept Google appears to view as a largely unnecessary inconvenience, a roadblock on its way to the bank. Have you EVER tried to get a personal response to ANY problem from Google? Don't hold your breath.
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