I just read Jason Hesse’s recent article on the falling stock price of Facebook. It makes some good points and generally I agree with it’s conclusions around the execution of the IPO and possibly today’s valuation. The multiples on revenue were after all, many times that of Google at IPO, for example.
Some of the other conclusions around future growth, I feel hold less water. Jason states:
“More than 900 million people is enormous, but could the company realistically double its monthly users? Anecdotal evidence would suggest not. ” …. “Naturally, the company’s growth could come from new sign ups. Facebook’s largest market is Europe, with more than 230 million users. This means more than one in four people in Europe are signed up to and use the social network. So realistically, there is little scope for this to grow significantly – if you’re not on Facebook already, the chances are you just don’t care and won’t join anytime soon.”
I don’t think I agree with this statement. Why won’t people care any time soon? I consider Facebook and social networking as a part of our lives, to be similar to the take up of email and other new technology, like the web itself. Even my Dad has a profile now, although admittedly for a 75 year old he is pretty well connected with PC’s, tablets and Android phones!
I also can’t help feel the sentiment of this statement is similar to the naysayers of the web 10 yrs ago; I would conclude social networking is following a very similar growth path.
With 1.5+ billion people on the regular internet but with 5 billion mobile subscribers, who are all fast moving to Smartphones with internet, the numbers also don’t support this statement.
And why would more than 1 in 4 people in Europe not want to join Facebook?
The real issue IMHO is not that Facebook will stop growing because people don’t want to be on a social network and embrace the sweeping social change which those services is causing, but whether Facebook can maintain and evolve a service which captures that growth.
Given that a lot of the growth will be users who access the service by mobile, this is the second issue which faces Facebook (no pun intended). Can a service routed online historically successfully transform it self to become the stalwart of the mobile world?
In summary then the -in my view inevitable- growth of users numbers in Facebook is theirs to screw. They must:
1) Continue to innovate their product and maintain existing users attention
2) Navigate the cultural preferences of the untapped developing markets
3) Become a truly mobile orientated company, with the same level of UI/Ux on mobile as they demonstrate online.
Arguably they are currently failing at no.3
Finally, there is the spectre of “Privacy”. Jason says:
“If anything, as privacy concerns continue to grow, more people will leave the social network.”
I think this is also unlikely UNLESS Facebook makes a very serious faux pas. Radical transparency is not for everyone but there is good evidence to suggest the trend is in that direction. I can’t help feel this argument, that social networking has a limited growth due to privacy fears, is akin to the talk about e-commerce never taking off online for the mass market because of fears of credit cards not being secure online. In other words, it’s a red herring.
Facebook must get it’s future strategy right and that strategy must be around becoming more a platform and less a destination site, if it wants to maintain it’s position as the biggest silo of social data on the web. If it doesn’t do this fast enough, it will likely go the way of AOL and Compuserve before it, or be out manoeuvred by a future more open and yet to exist mobile competitor.