Facebook has done what every other company only dreams of doing, which is get almost everyone in the world to use them, and on a relatively consistent basis.

The problem is that they haven't been able to follow this up with another home run. They have all these users, and unfortunately their best way of monetizing these users so far has been ads. And even then there is anecdotal evidence that these ads aren't very effective. And even worse, their users are moving onto mobile far quicker than they anticipated, and because that space is unmonetized, they are losing a large source of income. They are facing the perfect storm of poor monetization of their current users, a mobile platform that is completely unmonetized, and quicker-than-anticipated migration of their current users to this unmonetized platform.

The Facebook desktop experience is a lot less sticky than they believed, and now they need to scramble to fix this gap in monetization, and until they do (and if they can), their stock will be under pressure. The movement of users from Facebook desktop to Facebook mobile is something that probably could have been picked up a lot sooner through their analytics, and something they should have addressed a lot sooner, instead of publicly scrambling now for a solution.

I thought 2-3 years ago that the logical next step for Facebook was to invest heavily in their Facebook app ecosystem, so that people would log into Facebook and stay there the entire day. They could have email, IM chat, world news, tv shows, music, word processing, etc all from various Facebook apps and keep their users engaged all day long. It would follow the natural progression of Operation System to Browser to simply Facebook. And with the iPhone App store as a model, maybe they could charge 30% and make loads of money that way.

But this never seems to have taken off, which seems like a strategic misstep. I find the Facebook app space to be relatively inactive, except for games like Zynga, but even Zynga's results show that Facebook app usage appears to be dropping. Because the Facebook app experience is relatively non-existent, it means that the only really useful feature of Facebook is the newsfeed and photos, both of which can be reproduced very well on the mobile. If they had a healthy Facebook app ecosystem, it might slow down people's migration to strictly mobile, and allow for better monetization of users as well.

As a side note, I've been trying to develop a Facebook app just to learn, and I have to say that the developer documentation is amongst the worst I've come across. Things have changed so quickly that doing Google searches is relatively useless. And even the latest documentation doesn't appear to be proof-read, lacks good explanations or examples, is confusing in many places, and some links don't even work. Thank God for stackoverflow! There are a lot of weird loops that have to be jumped through as well, which feels hacky, but I imagine there are technical reasons for it. But still, it feels like the entire experience of developing an app should be cleaner and easier. Part of it is probably because you can't host your apps on Facebook servers, so all this indirection causes technical issues, so maybe the solution (if it even matters anymore since app development doesn't seem very popular) would be to offer their own hosting service.