Internet

The future of Facebook

(GUARDIAN) - 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.

In the real world, if an enterprise – a bank, say – becomes “too big to fail”, then that’s a failure of regulation because it means that normal competitive forces have been disabled. A capitalist economy can’t function efficiently if enterprises are immune from the consequences of their mistakes. That’s the “moral hazard” that the Governor of the Bank of England was so keen to avoid when the banking crisis first broke.

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