Indigenous Peoples Literature: The Facebook tweak that killed a billion-dollar industry

Facebook is known for operating in a perpetual beta state, making major changes not infrequently. Problem is, that can stifle a quickly growing niche.

By Ryan Holmes, contributor

FORTUNE -- Mark Zuckerberg is famous for keeping Facebook (FB) 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?

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Absolutely not. Timeline for Pages is a boon to consumers and, while it might not seem so at first, a boon to the brands trying to reach them. In one deft move, Facebook has purged itself of petabytes of stale marketing schlock (the equivalent of so many flashy neon signs), obliged companies to engage more earnestly and intimately with their audiences and reinvigorated its brand Pages. In short, it has privileged the kind of content that social media was made for -- authentic, timely and useful exchanges between human beings -- over glitz, expensive graphics and tired self-promotion.

"It's an opportunity for brands to tell more engaging stories on Facebook than they can now... It puts them more in control of their content," points out Ian Schafer, CEO of highly respected social media agency Deep Focus, in an interview with Mashable's Sam Laird. Timeline, with its continual exchange of photos, videos, comments, promos and other posts, is built around a near real-time dialogue between brands and their fans. At the end of the day, this represents a far more powerful promotional tool than a default landing page, no matter how well designed it may be.

Business owners themselves stand to reap the biggest benefits from Facebook's changes. Instead of draining marketing budgets on agencies and third-party apps to customize the look and feel of tabs, companies can focus on the important stuff: pushing out quality content through their own Timeline. Style gives way to substance, suggests Mashable's Lauren Indvik, allowing companies to devote fewer resources to developing tabs and "more to the content that appears on their walls."

And for brands, content - not a splashy landing page - is the key to the real prize. Even the best Facebook Page, after all, draws only limited traffic (How many people do you know intentionally go to the Coca-Cola (CKE) Page or the Red Bull Page or the Billy Bob's Dry Cleaning Page?). The true objective for brands is to get their updates to show up on users' own walls, in their personal news feeds right next to mom's lasagna recipe and funny cat videos. This is where people actually spend time on Facebook. This is where messages - viewed by our own friends, family and colleagues - have greatest impact and credibility. This is where posts are commented on, shared and reshared and viral effects kick in.

The only way for a brand to make the leap from its own Page to the intimacy of users' news feeds is by posting interesting and timely content. (Exactly how this jump happens is a tightly guarded Facebook mystery, but it's linked to how often users have liked and commented on a brand's posts before). In other words -- no matter how nice a Facebook Page looks -- if a business doesn't have anything engaging to say, it's never going to get the views that matter. With the demise of Facebook tabs, that's true now more than ever.

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Accordingly, in marketing departments focus is shifting from apps that handle the mechanics of Page building and maintenance to apps that get the right content to the right people at the right time. Products centered on tab building (Vitrue, Buddy Media, Context Optional, Involver) are taking a backseat to social media management systems that streamline content publishing and improve how companies respond to user comments (CoTweet, HootSuite, TweetDeck). While none of these tools will write your posts or tweets for you, the best of the bunch can actually schedule optimal times for posting and geo-target messages at specific users. Some include sophisticated listening tools to monitor mentions on Facebook and other networks for fast response. Others let whole teams collaborate on creative social messaging campaigns.

Fancy page-builders -- a short-lived, billion-dollar industry -- are ceding to social media management systems that nurture a rich, relevant and continuously updated Timeline. This dialogue is the heart of social media. Facebook knows it. So let's pay our respects: Tabs are dead. Long live the Timeline.

Ryan Holmes is the CEO of HootSuite, a social media management system with four million users, including 79 of the Fortune 100 companies. In the trenches everyday with Facebook, Twitter and the world's largest social networks, Holmes has a unique view on the intersection of social media and big business.