Has Facebook just unfriended its users?

Facebook needed to do something. It was facing increasing criticism that it was no longer cool, whilst also trying to appease shareholders post-IPO over its revenue generating potential. And so it made its move. Could it satisfy both camps – its users and its shareholders?

The answer appears to be “no”.

During a press event yesterday evening, which (based on the countless live tweets and blogs) veered from baffling to incredulous and then to underwhelming, Facebook CEO Mark Zuckerberg took to the stage to inject some coolness back into the social networking site. His definition of cool: graphs. That’s right, graphs. Social graphs to be precise, which were lapped upped by the math nerds who instantly understood the power of this new search tool – it’s not web search, it’s Graph Search. It’s like a gigantic SQL query right there in your Facebook page. Orgasmic!

But hang on, this ability to search and filter your friends likes, photos, locations, timeline – heck, entire social history – is a little bit intrusive, isn’t it? It certainly is, but Facebook was at pains to highlight that only information that you share with your friends will be included in searches. Still, best to check your privacy settings just in case…

Of course, you and I won’t be the only ones using the social graph for filtering our connections – it will also be used by advertisers to hit us with extremely targeted advertising. It’s an incredibly powerful, and potentially lucrative, tool. But will Facebook users really want multi-national corporations knowing so much about you? The only way to truly prevent this is to close your account and go elsewhere, which is too much of a doomsday option for most users – for now. At least, that will be what Facebook is hoping. There’s no point having the world’s most powerful ad service if there’s no-one left to reach.

There’s also not much point having this advanced functionality if users only spend part of their time on Facebook. What’s needed is for them to spend 100 per cent of their time on the site. Everything they do, from messaging to photo sharing, and even browsing, must be done on Facebook for this to truly be effective. Yes, I added browsing. This after all was one of the identified areas that Facebook needed to address if it was to compete better with Google, and now they have finally done it – sort of. Facebook was signed a deal with Microsoft to add its Bing search engine to the site.

This was Zuckerberg’s attempt to steal Steve Job’s “one more thing” moment away from Apple – as towards the end of the press conference he uttered that famous phrase and the fans went wild with expectation. Could it be the Facebook Phone? Don’t be silly, it was only Bing. And great as Bing is, a partnership announcement is simply not cool. Zuckerberg is many things, but he is not the heir to Steve Jobs.

As for those wild predictions about a Facebook phone – baseless. Zuckerberg had gone on record to say there wouldn’t be one. Do analysts really believe there is room in the market for another phone OS? Certainly not one that could hope to challenge Apple and Google in the short term. It’s not happening, Facebook didn’t make a hardware announcement, so get over it.

Richard Windsor was one of the few analysts to guess right, commenting on his blog before the launch that:

“Whatever Facebook announces today, the chances are that most commentators will get the wrong end of the stick. I do not believe for a second that Facebook wants to be like Apple. Instead I think this is about directing and keeping internet traffic for the benefit of its ability to sell targeted advertising.”

Despite yesterday’s announcement, Facebook remains uncool to many of its users, especially the influential ones. They will no doubt have uttered a socially-correct “Meh” at the news. But does it matter? Even if Facebook doesn’t grow any larger than its current billion-strong community of active users. Even if many of its users wise up to the privacy issues and start purging old timeline data, or refuse to relax their privacy settings, does it matter? Facebook can start to capitalise financially on those who remain, and that’s still a huge community of users. Make cash while you can? It badly needs to improve on last year’s $4.2bn of revenues.

The markets didn’t appear that impressed though, closing after hours trading down 2.7 per cent at $30.10 (remember, it opened back in May at a disappointing $38.23). Looks like the recent uptick since Christmas has come to an end.

Here is how Zuckerberg described social graph during the event:

“This is one of the neatest things we've done in awhile. Graph Search is a completely new way to search for information.”

He added that: “it’s going to take years and years to index the whole Graph,” and that there would be a limited beta launch now, rolling out slowly in the months to come. He also very briefly touched on mobile, but only in the sense that social graph needs to expand from its English-only and website-only launch:

“In the future there are obvious things we need to get to, like mobile.”

Bottom line of all this – is this the right way for Facebook to encourage its users to increase its use of the site, by searching and divulging more information? The more they use the site, the more the social graph will learn about them and their habits, and the more the results of Graph Search will appeal to advertisers. So Google.

If it can persuade its users that there are no privacy concerns, then maybe it will succeed. Does it have to be “cool”? Google isn’t all that cool (Google+ anyone?), but that doesn’t bother it. Cool is over-rated – but try telling that to a teenager. And there’s the rub – Facebook still thinks it needs to be cool and appealing to teens. If this target group starts to think it’s being exploited, then that’s not cool and they will walk away from the service. In attempting to encourage (force?) its users to do more on the site (“more” being activity that is advertiser-friendly of course), Facebook risks shooting itself in the foot. This could backfire badly. Time to unfriend.