Facebook's Fail Tale

Jason Calacanis posted a good piece yesterday on Facebook's recent privacy snafu (Is Facebook unethical, clueless or unlucky?). I'll begin with a few of my favorite excerpts:

"Facebook proved again this week that they are either the most unethical or clueless internet company in the world."

".. they screw up on important issues almost as if it's a "best practice" to do so".

"So why is Facebook trying to trick their users? Simple: search results. Facebook is trying to dupe hundreds of millions of users they’ve spent years attracting into exposing their data for Facebook’s personal gain: pageviews. Yes, Facebook is tricking us into exposing all our items so that those personal items get indexed in search engines–including Facebook’s–in order to drive more traffic to Facebook."

And Chris Sacca had this to say on Twitter: "Each time Facebook makes an ugly privacy move, it not only betrays users, but the rest of the Valley has a field day recruiting engineers." That viewpoint was driven home later that night in Palo Alto when two former Facebook engineers told me that several more engineers are leaving Facebook. The reason? They're losing confidence in Zuckerberg. And most importantly for them, at the rate things are going they don't think their options are going to be worth much if anything by the time the company does it's IPO. Best to get out now while the gettin's good.

The pressures to increase revenues prior to filing an IPO are intense and the only way that Facebook knows how to do that is to put the pedal to the metal with ads, directly or through search. But the execution of this latest "reverse privacy" strategy through brut force has backfired, and their attempts to reactivate dormant user accounts by prominently suggesting that users "reconnect" with these dormant users hasn't fared much better. Face it, both new user growth and existing user activity have slowed over the past six months. In the face of this they're forced to increase revenue in preparation for an IPO sometime in 2010. They're in an operational vise and they don't have many levers left to pull.

The cumulative effect of a year's worth of continual management missteps is reaching critical mass. If Facebook engineers are losing faith, then potential IPO investors aren't going to be far behind. So unless Mark can right his ship within the next couple quarters I think the chances of him retaining his title as CEO as the company prepares to go public are somewhere between slim and none. Facebook is on a very slippery slope at the moment. It's time to bring in some experienced leadership at the top.