Anatomy of an Internet death spiral

Be forewarned, Facebook: When tech companies screw customers, tech companies die. See Zynga and Digg for proof

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If you've ever played a Zynga game, you'll know what I'm talking about; the pages are festooned with more ads than a stock car, and they're constantly trying to get you to download new games and spam your friends with invitations. I tried playing Words With Friends once for about five minutes, then realized if I continued, I'd be left with Words But No Friends.

Business Insider's Henry Blodget points out that back in April, when the company's share price was four times higher than it is today, Zynga insiders -- including CEO Marc Pincus -- issued a "secondary stock option" and cashed out. Pincus alone made more than $200 million on the deal; other executives and individual investors made from $4 million to $8 million apiece.

Blodget adds: "I know many of these folks personally ... and like and respect them. I think the last thing they would intentionally do is unload stock when they thought it was about to crash."

I don't know any of these folks personally, but to me that move says they could clearly read the writing on the wall, and it said, "Get out now, while you still can!"

Now Facebook appears to be tottering, just a bit. Wall Street is hammering it hard, in part because Facebook truly has screwed the pooch in mobile. Again, if you've ever used a Facebook mobile app, you'll know what I'm talking about: They suck. They're almost useless, compared to the website, and they crash routinely. (Your mileage may vary, but I doubt it.)

Now rumors have surfaced yet again about a "Facebook phone." Like that will solve anything -- if it can't make a decent mobile app, how will Facebook design an entire phone?

The lessons here are obvious: When you ignore your users and pay more attention to revenues and growth projections, you're going to be in for a world of pain -- but not for long. Because soon after that, you won't be around to feel any more pain.

What other once successful companies are blowing it big time? Post your harangues below or email me:

This article, "Anatomy of an Internet death spiral," was originally published at Follow the crazy twists and turns of the tech industry with Robert X. Cringely's Notes from the Field blog, and subscribe to Cringely's Notes from the Underground newsletter.

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