The Facebook tweak that killed a billion-dollar industry

From Fortune:

Mark Zuckerberg is famous for keeping Facebook in a state of permanent beta. And while each new wave of features is bound to baffle some users and delight others, for businesses even minor updates can have a major impact on the bottom line.

Take the rollout of Timeline for Facebook Pages, which are used primarily by brands to engage with consumers. On the surface, the changes hardly sounds earth-shattering. In a nutshell, as of March 30, Facebook officially canned the old Pages format, which allowed businesses to set one “tab” as a static landing page — a kind of flashy storefront to lure in consumers. From there, users could click on different tabs to explore photos, videos, promos or any other custom content.

The Timeline redesign changed all of that. Tabs have been minimized and — more importantly — companies can no longer set a default landing page. For brands, a critical chance to make a first impression is gone. The first thing users now see on Pages is a fluid, ever-shifting Timeline of recent posts and comments. (Brands wanting to highlight specific content can still “pin” a post to the top of the Timeline for up to a week.)

Still with me? Here’s where things get interesting. According to PageLever, a firm specializing in Facebook analytics, user engagement with tabs on Facebook Pages is down a staggering 53% since Timeline launched. “Without the option to set a custom tab as the default view, most users will never see a tab again,” explains PageLever founder Jeff Widman in an interview with Mashable. “We’ve heard from several users they didn’t even realize tabs still existed with Timeline.”

So what? Over the years, countless companies were born to help brands customize the look and feel of those default landing tabs and other tabs on Facebook Pages. And we’re not just talking about mom-and-pop design shops. Let me name drop. A good part of the business at Vitrue (acquired by Oracle (ORCL) for $300 million in May), Context Optional (acquired for $50 million in May 2011) and Buddy Media (acquired by Salesforce (CRM) for $689 million in June) is dedicated to customizing those very tabs for corporate and enterprise clients. Just those three companies alone are valued at more than $1 billion.

Now – nearly overnight – a significant piece of their business model has been compromised by a seemingly minor tweak in Facebook’s layout (Betabeat’s Jessica Roy goesso far as to ask if that’s why Buddy Media was so eager to sell). All of this begs a familiar question, being debated on comment boards: Is it time to light the torches, get out the pitchforks and — once again — skewer Facebook for messing with a good thing and refusing to leave well enough alone?

Absolutely not.

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