And while 2014 is, in all reality, just another year for the social media giant to collect users, data, and revenues, it's also a reminder of how far Facebook has come — and how quickly the tech world evolves. As Facebook approaches the ripe, old age of 10 (that's 70 in tech years, right?), the company will continue to face questions about its functionality in the social media industry it created. We're not talking about Facebook disappearing — in fact, all indications point to another year of increased user metrics and revenue, in keeping with its years of steady growth. Instead we're talking about Facebook's identity, which could be lost amid the new features and ad rollouts that have defined the company's most recent growth years. In a nutshell: What is Facebook now? And where does it fit into the social media landscape it helped define?
Building Better Algorithms
The good and bad of Facebook is that it has everything
The good and bad of Facebook is that it has everything. It's a search engine, a dating profile, a family photo album, an address book, and a newspaper, all rolled into one. For many longtime users, it's also a never ending class reunion, featuring a stream of life updates and photos from long-forgotten high school or college acquaintances. The problem staring Facebook in the face, is that there is so much information and connectivity on the platform that it's becoming hard to keep any of it straight. Other social networks, like Twitter, Snapchat, or WhatsApp are filling the niche use cases like photo sharing or status updates that used to be Facebook's domain. Facebook tweaked its News Feed algorithm multiple times in 2013, twice with an attempt to bring more "high quality" content to users' News Feeds. It has spent years identifying which friends users want to hear from — now it's time for the company to identify users' interests and the news items they want to see as well. The platform encourages users to engage with the ads they come across, in an effort to better identify which ads work and what people want to see. It's a lofty challenge with more than one billion users and one million advertisers, but its also a challenge Facebook will likely come closer to solving in 2014 as its efforts continue. Facebook announced plans in early December to further grow and develop its artificial intelligence research team, a major sign that the company plans to continue perfecting the algorithms used to surface and share content on the platform. "[Facebook] is sitting on possibly the greatest cache of user data ever compiled," says Nate Elliott, a principal analyst at Forrester Research. "Certainly they know more about users' affinities — their tastes and preferences — than anyone ever has. If they stopped dancing around [the data] and started using it, it would be incredibly powerful."
Facebook opened its first overseas data center in Sweden in 2013. A big part of using this data and information revolves around Graph Search, the platform's Google-like internal search engine that allows users to seek out more specific data from their network of friends. A Google search will return a list of nearby restaurants. In a perfect Facebook world, you would get a similar list, with the added caveat that these recommendations are coming from your friends, the people you trust and, in theory, with whom you share common interests. Graph Search is still in its early stages — the company announced the feature last January but only made it available to all U.S. users in August. Expect Facebook to bring the service to mobile in 2014, a move that will test its functionality as people use it on the go the way Yelp or Google are used now.
More Relevant Advertisements
Perfecting Graph Search is merely one use of Facebook's data stash
Perfecting Graph Search is merely one use of Facebook's data stash. The other, improving its ad service, may be the most important for both its bottom line and its relationship with users. There are few things more frustrating on Facebook than coming across an irrelevant ad — one that doesn't apply to the user's interests or personality. It's intrusive in the News Feed, and ultimately leads to a negative experience. There are more than one million advertisers on Facebook, but more than 25 million small businesses have active company pages. That means a lot of potential ad clients, and Facebook will continue going after them in 2014 . If Facebook can successfully serve up interested audiences to startups based on user data, you can expect many of those small businesses to pony up for a News Feed ad (or two) moving forward. With Facebook launching its first auto play video ads on Tuesday, ad revenue should soar in 2014. Pressure from advertisers to get video ads in front of appropriate users will also be higher next year. The company is rolling out the ads slowly, and only to a select number of users. Once the ads are expanded to all users (sometime later in 2014, presumably), we will get a glimpse of how effective the ad algorithm is. You can scroll past a News Feed post, but auto play ads are harder to ignore. Sending irrelevant ads to users will not only be more noticeable, it will be bad for all parties involved, including Facebook.
Addressing (Alleged) Teen Flight
Of course, advertisements only work when users engage with the platform, and Facebook spent the tail end of 2013 dealing with a cloud of suspicion regarding teens on the social network — more specifically, how often they are using the site. The narrative has been discussed for quite some time. Facebook doesn't break out its user metrics by age, meaning there is really no way to know how many teenagers are using the social platform during any given quarter. Teenagers, often the most tech-reliant age group, tend to set the agenda for which tech products are worth paying attention to — hence their importance to all social networks. In Facebook's case, there were a handful of signs over the past three months that declining teen use may be a concern for the social network. The most obvious came during Facebook's most recent earnings call, when CFO David Ebersman admitted that some teenagers were spending less time on the platform. "Youth usage among U.S. teens was stable overall from Q2 to Q3, but we did see a decrease in daily users partly among younger teens," Ebersman said. It was a brief mention, and there is no way of knowing exactly what Ebersman meant when he said "younger teens." Still, it planted the seed that teens may be leaving the platform, however slowly. In October, Facebook lowered the age requirements that restricted teenagers from making their posts public. Now, teenagers can choose if they would like to share their posts publicly. "While only a small fraction of teens using Facebook might choose to post publicly, this update now gives them the choice to share more broadly, just like on other social media services," a Facebook spokesperson wrote on the company blog. If other social sites were attracting teenagers this way, Facebook clearly didn't want to miss the party. The most recent evidence that Facebook may be concerned about losing teen users surfaced when Facebook reportedly tried to acquire Snapchat for $3 billion in November. The photo-sharing app is popular with teens — it claims users send 400 million photos and videos per day — and it would certainly help keep Facebook relevant to the youngest generation of social media users. Depending on who you ask, Facebook's supposed teenager retention issue is a major problem, or an issue overblown by the media. Michael Pachter, an analyst with Wedbush Securities, believes that because teenagers living at home see most of their friends and family every day, it makes the service's core functionality — staying connected — rather useless for youngsters. Teens are on Facebook to check it out, and whether they use it every day or not isn't the issue because the the site becomes more valuable as people get older, he says. "The teen concern is way, way, way overdone," explains Pachter, saying the reaction to Ebersman's comments were overblown. "[Analysts] will jump on anything. If the CFO coughs, it's like, 'oh, Facebook is sick.'" We should find out in 2014 whether or not Facebook is cool when it comes to teenagers, and if it isn't, how it plans to get back in their good graces. No matter the revenue numbers — and they should be healthy, especially with video ads in the fold — Facebook investors will undoubtedly listen carefully to what happens with the site's youngest adopters. As Facebook crosses the threshold into its second decade of existence, it will deal once again with the question we initally asked after the then-Harvard undergrad launched the site from his dorm room: what is Facebook, and how does it fit into our lives? As the company continues to expand its reach, we remain eager to discover the answer.
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