Is Facebook Too Big To Fail?

If you think Facebook is too big to fail, think again and mumble the mantra, “AOL.” Network effect notwithstanding, bigger may not be better. As John Naughton writes in Guardian.com, “If you have too few friends then people think you’re a loser; but if you have too many, they think you’re either a social slut or a self-publicist.”

Is Facebook now “too big to fail”? I don’t mean in the sense that the taxpayer would have to pick up the pieces if it went under, but in the sense that the social networking service has achieved a position of such dominance in the online ecosystem that its eclipse is unthinkable. Is Facebook, in other words, the next Microsoft or Google?

The question is prompted by a couple of milestones recently passed by Facebook. The first is that it now has more than 400 million members. The second is industry gossip predicting that its revenues for 2010 will exceed a billion dollars. Other straws in the wind are estimates of the size of the “Facebook economy” – ie the ecosystem of applications, services and products that has evolved around the service; and the moral panics it now triggers in the mainstream media – a sure sign that they fear a competitor…

By gradually breaching their walled garden, the Facebook founders have managed to avoid the fate of AOL – so far. Their boldest move was the launch of Facebook Connect – which allows external services like Twitter to interact directly with subscribers’ Facebook accounts. What this means is that people can interact with their Facebook friends without being logged in to the site. This has triggered an avalanche of development as companies strive to cash in on the network effects of such a large subscriber base. The metamorphosis of Facebook into a platform on which other people do interesting stuff was not just a smart move; it was also a necessary one, because social “networking” is intrinsically self-limiting. If you have too few friends then people think you’re a loser; but if you have too many, they think you’re either a social slut or a self-publicist. As we know from the anthropologist Robin Dunbar – see My Bright Idea, page 26 – the cognitive capacity of the primate brain limits the size of the social network that an individual can develop. Last year a study by Facebook’s in-house sociologist calculated that the average number of friends in a Facebook network is 120. And when it comes to real, intensive interaction, that number shrinks dramatically. It turns out that the average Facebook male interacts with only four people and the average female with six. Raed more.