Before discussing Time’s latest Man—er, Person—of the Year, Facebook President and CEO Mark Zuckerberg, it's worth revisiting the last time the magazine announced that an Internet CEO had just "changed everything." That Person was Amazon.com's Jeff Bezos; the year was 1999; and even in the context of “New Economy” theorizing, Time’s profile was breathless:
It's one of those perfect autumn nights that make Manhattan seem magical. There is not a cloud in the sky, and looking up from the streets, you can see stars. On the avenues, white lights speckle the trees. There is a chill in the air--just enough to ice the occasional breath--and the urgent roar of the city is a reminder that New York at this moment may be the Rome of the modern world. The NASDAQ is at a record high. Again. New companies are being born. It is a perfect night for a launch party.
This year it has always been a perfect night for a launch party. This year it's as if "ideagetthemoneyhireaCEOlaunchpartyIPO" has become one big, fast millennial screech. Companies that barely existed a year ago are publicly traded, their founders ungodly wealthy. Some argue the world has entered a long boom, a kind of economic speed loop, where the centrifugal force spins off nothing but wealth and happiness. And launch parties. So up and off an elevator you go, melting into an unimaginably beautiful crowd. Every woman looks like a model; every man looks, well, Italian. This is an Internet party, right? What on earth could they be selling? A sign on the wall reminds you: this is the launch party for Beauty.com.
Beauty.com was bought by a larger eCommerce company, Drugstore.com, whose common stock sold for $67.50 on the NASDAQ throughout the summer of ’99. It’s now listed for $2.15, a retracement of some 97 percent. As it turned out, women never really changed the way they buy makeup.
If these are such hot businesses, then why are they hemorrhaging cash? Amazon--the company everyone wants to be like--could lose nearly $350 million this year. O.K., the Net is different, but don't profits and losses matter anymore? They do. Bezos insists Amazon's oldest businesses--books, music and video--will be profitable by the end of 2000.
But Amazon's losses are also a sign of the New Economics of Internet commerce. These new rules spring from the idea that in the new global marketplace whoever has the most information wins.
In the heady days of ’99, you could write a sentence like that last one with a straight face.
Time could have done worse, of course; instead of Bezos, it could have chosen Gary Winnick, the con artist who sold the world “Global Crossing.” Amazon is still around; it’s highly profitable; and, I presume, most readers of this site use its services regularly. (One should note, however, that it took AMZN a full decade to regain its ’99 valuation of $105.)
The Bezos choice remains notorious and embarrassing, however, for what it represents—the mainstream media’s wild-eyed enthusiasm for the dot.coms; its treatment of IPO millionaire as prophets, gurus, and shamans; and its recitations of their half-backed excuses for lacking a proper business model as esoteric economic wisdom. (Profits don’t matter anymore; it’s all about SYNERGY.)
Within a year of Time’s announcement of the advent of the New Economy, it had completely imploded.
The basic principle of value investing—buy at maximum pessimism; sell at maximum optimism—holds true for trend determination as well. When women at cocktails parties inform you that it’s irrational to rent and that housing prices can’t fall because so many people have so much money tied up in them, you can be certain it’s a good moment to sell. In turn, by the time Time—or Thomas Friedman or Diane Sawyer etc.–has become convinced that a major new trend is afoot, you can be certain that, if it existed at all, it’s already run its course and is set for dissolution. The purveyors of conventional wisdom—famously defined by Joe Sobran as “what everybody thinks everybody thinks”—are always wrong.
Regarding the Zuckerberg choice, there are many reasons to believe that Facebook has passed its prime—indeed, that Time’s December 2010 cover might one day become a major source of amusement.
First off, Facebook’s numbers are flattening out. As Gonzalo Lira writes,
On July 22 of 2010, it got its 500 millionth user—but now three months later, it’s at 543 million.
The inference is easy to make: From the halcyon days of consistently charting 25 million new users per month, Facebook is now going up by about 14 million new users per month.
Still: 14 million users a month? The implications are staggering.
FB doesn’t release numbers of users who’ve quit—rather cagily, they say that, on any given day, half of all users log on to Facebook.
But none of that really matters: Who has registered, and now is inactive, who registered and is on every day, who registered and is sporadic, who registered and now wants their Facebook account shut down and disappeared—all of that is trivial and unimportant, compared to the central and obvious fact that they all registered on Facebook.
Moreover, Facebook and Zuckerberg have inspired far more negative emotions among users than Bezos and Amazon—or any dot.bomb—ever did. And Zuckerberg has only begrudgingly responded to users’ worries over privacy and discretion.
What, the Facebook corporation isn’t going to make use of all this data it’s collected? Dream on, fool—and if you’re still dreamin’, then I got a bridge in Brooklyn I’d like to sell ya.
Of course the Facebook corporation is going to use all the data it’s collected: There is really no other use for all this data. The Facebook program is the world’s largest personal database. The world’s largest corporate database. The Facebook corporation will sell this data to other corporations—I’m frankly assuming it already is doing so.
Facebook’s recent re-design has transformed each profile into even more of a consumer preference survey just waiting to be data-minded—one now is encouraged to define one’s self by which professional sports team one roots for, which corporations one “likes,” etc. Facebook is ultimately a cluttered mess, with numerous redundancies, unhelpful features, and comment boxes suitable only for scattered, snarky one-liners and little else. It is quickly becoming the opposite of the intuitively functional web—losing its clean, Ivy League aura that originally helped its triumph over the ghetto-fied MySpace.
The kicker to all this is that Facebook has really no barrier to exit. There’s little stopping its hundreds of millions of users from stampeding to the exits, transforming the current Babylon of social media into something resembling the mysterious ruins of the Friendster civilization.