Why the Facebook model is not sustainable in the long run

This post was written in 2012–2013 and reflects thinking at the time. For current views and topical discussions, please see recent articles.

"Why Twitter will live and Facebook will die" (and there is also a niche for Friends Reunited!)

Reports of the growing "Facebook fatigue" have been circulating for a couple of years now. This perception has been borne out by the PR disaster that was the IPO. But in my view the causes of that are often misunderstood. It is easy to say that FB has "stopped innovating", or is "resting on its laurels", or "has been too focused on advertising and not enough on user experience". All those things may be true, but they are merely symptomatic of a bigger structural problem.

I think this article ("Why Twitter will live and Facebook will die") on Forbes.com has it about right. In a nutshell, FB has a predominantly internal focus - people (and now also companies) trying to make themselves look cool in the eyes of other "cool kids", therefore it has too many useless and time-wasting features. Eventually, disenchantment is inevitable. Twitter, by contrast, is all about providing fresh information in real time, hence, the reasoning goes, you never tire of it.

You don't have to agree with everything that the author Rocco Pendola says ("You can do everything on Twitter that you do on Facebook, plus stuff that’s actually useful" - well, you can't upload video clips and play games, for instance), nor do you have to be a Twitter obsessive ("I keep my smartphone next to my bed. When I wake up in the middle of the night and, most definitely, when I wake up in the morning, I spend a minimum of five to 10 minutes at a time on Twitter. Then, I am on it all day") to agree with his main contention.

FB is just too much like damn hard work - all the self-embellishment, "friend" management etc - that's the main reason why I never signed up (even before the well-publicised concerns about privacy and information security). This by the way applies to all similar services, from Bebo and LinkedIn (which however has the saving grace of being highly utilitarian) to various country-specific spin-offs (e.g. vkontakte.ru - literally, "in touch"), which is even stylistically similar to FB). There will be always a place for this kind of sites - teenagers and students / young professionals with too much time on their hands and no understanding of how to prioritise their time. But this natural demographic also determines the limits of growth. Besides, young people will always be tempted by anewer, "cooler" places to hang out, hence no single platform is safe in the long term (hello, MySpace!).

What of a third category of social media services: personal discovery / reconnection sites? Friends Reunited (now under new management) was the first and remains the best known of those. Again, there are several country-specific clones (e.g. odnoklassniki.ru, meaning "classmates"). In all cases, while there is a wide range of functionalities for instant messaging, picture sharing etc, the main point is about re-establishing social links with people from one's personal past (classmates, university friends, etc). Once those links have been restored, user activity tends to dip significantly, as people then switch to off-site methods of staying in touch (or simply realise that there were good reasons for not staying in touch in the first place). LinkedIn, while similar in some respects, is quite different in that it seeks to establish new communities rather than re-establish old ones.

The "personal discovery" sites face another constraint which will always limit their growth potential - we have already seen the passing (in the social networking sense of the word, anyway) of the last pre-email, pre-mobile phone generation. From now on, the new cohorts of users quite simply will never face the situation of having lost touch with someone against their own will. They grow up permanently online and on-call. In a sense, this is quite sad - if you've never lost, you've also never found. But that's just lyrics, I guess.

The polar bears can rest easy, for now...

This post was written in 2012–2013 and reflects thinking at the time. For current views and topical discussions, please see recent articles.

The Stockman gas condensate project goes on hold, as investors lose c.$400 million each

Remember the"war of words" over mineral rights in the Arctic a few years ago? The story went like this: while the commercially viable reserves elsewhere are peaking or declining, the Arctic harbours untold riches of oil and gas, which are now becoming accessible due to global warming. Therefore, all the countries with an Arctic coastline (the United States, Canada, Denmark, Norway and Russia) felt obliged to grab as many square miles as possible. Now it looks like all the excitement was a bit premature.

For many years, one of the biggest potential E&P projects in the Arctic was the Stockman deep-sea gas condensate field in the Russian sector of the Barents Sea. The investment thesis was based on bringing the gas to shore, liquefying it there in an LNG plant, and transporting the LNG by tanker to the US (at the time, Henry Hub prices were quite tasty). Initially, Gazprom, which holds the exploration licence, planned to go it alone. Then, after the scale of the capex requirement and the technical complexity had become clear, it invited western oil companies to come in as partners. Eventually, Norway's Statoil and France's Total joined the consortium, with Gazprom keeping 51% of the interest.

For years, things have been suspiciously quiet, and now we know why. The consortium has been officially disbanded, the three partners having lost over $1.2 billion between them on feasibility studies and such like. The Statoil representative has insisted that the project remains technically feasible, but "the commercials needed to be better defined". What it looks like is that the cost estimates have spiraled beyond the parties' willingness to invest, at least for now. I also suspect that the decline in US gas prices, due in no small part to the increased production of shale gas, has also played a major role.

With this flagship project hitting the buffers, expect the "race for the Arctic" to slow down considerably. Incidentally, this should give the US an opportunity to re-enter the fray in a much stronger position. Unlike the other four "Arctic nations", the US is not at present a party to the Law of the Sea Convention. Should the US sign and ratify it before the other players take a fresh look at the opportunities in the Arctic, it will become a major force to be reckoned with - in this area, it is not one at present.