There is an aticle today on TechCrunch that asks the 35  billion-dollar question : “Can Anything Stop The Facebook Juggernaut?”

The statistics about Facebook’s dominance are staggering indeed : 500 Million users, $35 billion in valuation, $836 million in funding, accounting for nearly 25% of web traffic  and growing virally at 5% a month.  It certainly appears to be an unstoppable force.

But the author also argues that  Facebook ought to die  – because it is medicore and he goes on to say that it is also : “….mindbogglingly gargantuan, relentlessly mediocre, and almost inescapable. Like Microsoft twenty years ago, they will succeed because a bad standard is better than none: and like Microsoft ten years ago, they “innovate” by clumsily copying—and then trying to squash—the real innovators.”

Here are my thoughts on this :

While it does seem inconceivable today that someone can stop the Facebook juggernaut – one only needs to review the short history of software and technology to see not only how possible this is but also how often it has happened!   Sure, Facebook has 500 million users, and yes it is  almost at the point of non-displacement with the network effect. And yes, the  Facebook  Connect widget’s tentacles are embedded deeply across the world wide web.  But no matter – it can still happen.  Just a few examples should suffice to sober those high on the Facebook koolaid and spur the Davids who want to challenge the Goliath.

Let us consider Lotus – they were kings of the hill when it came to spreadsheets in the eighties and had almost 100% market share – in fact they literally invented the genre – but then along came Excel – which did everything that Lotus did but was built to leverage the Windows graphical interface (GUI)  with pretty WYSWIG fonts and graphics. Lotus – the incumbent – hesitated and waffled about moving to the GUI  and a few years later – poof – they were gone.  And does anyone remember WordPerfect – exact same story as Lotus – went from almost 100% market share to zero – in just a few years. No one thought that this could happen so fast back then.

OK, so you say that these are all pre-web stories – not applicable to the web era.  Besides, these did not have the network effect advantage that Facebook has. Well go back to 1997 and see if anyone was thinking if it was possible to challenge the top search engines then – Yahoo, Altavista and Excite – collectively commanding close to 100% of the search engine market. No one thought it was possible to displace them either. It is easy to see now that search was broken – but it was not very obvious then – except to a couple of geeks in a garage with a quirky compay name and a better vision.

Lastly, consider how Facebook  has completely displaced  MySpace in a few short years as the leading social network.  MySpace still has hundreds of millions of users and has  the network effect working in their favor – but it has  ultimately been  displaced by Facebook.   The how and why of  this pattern of a  technology or company emerging  to become the leader in its space and  then quickly falling out of favor is both fascinating and instructive. It  has  many valuable lessons and can also be  an inspiration for the Davids of the world who want to take on the  Goliaths.

In fact, one could argue that it is easier today to displace Facebook than in earlier eras.  In the era of Lotus and WordPerfect of course the   internet did not exist – and there was very little chance of any network effect  helping you spread adoption virally.   Today, however the very forces that helped Facebook grow can also help anyone else that seeks to challenge it.   The technology that makes it easy for users to login  to Facebook  from anywhere on the web  and which also grew Facebook virally – the Facebook Connect widget – can also  be leveraged  to allow users to easily create profiles on the new site.  Add to that the ability to export data that Facebook recenly so generously allows users to do – and it makes the transition even easier.

To compete with and displace Facebook however,  the alternative has to address all of the shortcomings and then go beyond it.  I agree with Pete Cashmore of Mashable.com who  argues in  this article on CNN.com that the Facebook ‘Killer’  won’t look like Facebook.  The following  summarizes his view very well :

But when it comes to toppling web giants, one factor is frequently overlooked: The replacement is usually radically different from its predecessor. In other words: If Facebook is ever beaten, it won’t be by a site that tries to be “Facebook, but better.

Pete Cashmore  thinks  that the much-hyped and recently  launched social network Diaspora  – which many hope will be a Facebook ‘Killer’ –  will most likely not live up to its expectations.  Diaspora is  not much more than  a Facebook clone – albeit slightly better.   Many examples seem to indicate a simple pattern –   that  market leaders seldom get displaced by clones. Another example is Digg. Digg  fell out of favor not because of the numerous Digg clones – but because people started using Twitter and Facebook  to do what they could do on Digg –  share interesting content with their followers and friends. Twitter and Facebook were radically different but still displaced Digg.

Why is this?  Markets are  terrible  at articulating exactly what they need – but are incredibly fast at flocking and adopting the better technology when presented with it.   Generally the replacement solves a  problem or meets a latent need that is not addressed by the market leader  – but often it is not  at all  obvious that a problem  or a need  existed till after the solution is presented.   Seth Godin describes this pheomenon of seeking out what works  with a brilliant analogy in his blog post –   “Seeking Market Resonance”

“The market awaits your innovation. Things that might make it vibrate and resonate don’t work. Then some do. It’s not always obvious before you start what the right entry point is, what the right product is, what the right speed is. And knowing that you don’t know is the most important place to start.”

The challenge then is to discover what will make the market resonate.  To find those  hidden problems and needs – the gaps that exist which  are not being addressed.    All  the rumblings against Facebook  are chinks in its armor and  hints that there may indeed be problems or needs that are not being addressed. Let me just add that the most obvious and oft-cited problem with Facebook – the numerous Privacy issues with the site is not necessarily the problem that needs to be solved.  In my view, Facebook does not  accurately model the  nuances and  dynamics of real-life social networks. Facebook’s model  is  flat and linear but real life social networks  are  complex and hierarichal. And that according to me  is where the opportunity lies for any Davids that wants to challenge the Facebook Goliath.

Facebook is indeed version 1 and the Altavista of Social Networking – an early but imperfect solution that  be disrupted  by a Google. Ironically, may not be by The Google – but probably by two new geeks in a garage somewhere.  But they better hurry – as the window of opportunity is closing fast for them.

Full Disclosure : I am currently working on a social network application (for one of our websites), which uses a concept  called social hubs that separate social interactions  based on our  relationships  in real life.  It puts the control back with the user.  That is all I can reveal right now!