Analysis: Can Facebook actually perish?
Rumors and speculations have begin floating all around the Internet about a possible demise of a website that helped connect the world like never before. Well, really? Can the #2 site which is so popular and so unique ever die? We find out…
Almost every other tech-site has been talking about it. Even we have been expressing concerns on the fate of Facebook in the years to come. Everything was moving almost fine till the social network decided to go public, and the soaring expectations got shattered in a matter of days. Rumors and speculations began floating all around the Internet about a possible demise of a website that helped connect the world like never before. Well, really? Can the #2 site which is so popular and so unique ever die? We find out…
Why the concerns?
It all started in May, 2012 when Facebook mulled its IPO and listed its share with a base price of $38. The share was expected to leap higher and crash all records, but that didn’t happen. This was then attributed to the decision of General Motors withdrawing its $10 million advertising budget that oozed out confidence from investors. This triggered a round of pessimistic blogs, Op-Eds and ‘free advices’ – all making the common man believe that the social network could actually come down.
Figures were excavated from past official releases, which nobody had paid attention to before. It was shown that Facebook was growing, but the growth itself was decelerating. This is, well, true but the situation is not that alarming that is being portrayed. Have a look at those figures:
Q3 2011 vs. Q3 2010: 954M vs. 467M -> 104% growth
Q4 2011 vs. Q4 2010: 1131M vs. 731M -> 54% growth
Q1 2012 vs. Q1 2011: 1068M vs. 731M -> 46% growth
The revenue has definitely increased, even crossing the billion dollar mark in this year’s first quarter. But the rate of increase has come down. So, till now the verdict is: Yes, Facebook is slowing down.
Will it continue in future?
Sadly, there are a few reasons that make us believe that Facebook will continue shrinking in future. Here they are:
- Facebook currently has more than 900 million users and will soon boast of a billion. But that figure would have covered almost every part of the developed world and a large part of the BRIC nations. The next billion users, as Mark Rogowsky, Entrepreneur at raconteur rightly points out, will come from less developed regions of the world which will be less easy to monetize.
- Add to this the current economic lull which is looming over the developed countries. This is going to paralyze the spending power of people there, making them less interested in ads.
- The argument that Facebook till date has not discovered an effective way to make money from its mobile version is well known.
- Some people have even started questioning Facebook’s desktop model of ads. They say Facebook is more like television. Marketers are guessing that their products are likely to sell to a specific demographic, and hope that the demographic will actually pay attention to the ad and click on it.
Then there is the silver lining!
Too much of scepticism, isn’t it? If there are reasons to believe that Facebook will perish in near future, there are equally valid points to revert that belief.
- Let us consider the peculiar case of Twitter – another social networking website. Facing more or less the same concerns around a year back, Twitter has been able to successfully monetize its business, especially in the mobile arena. The website earned $140M in 2011 which is roughly 100% annual revenue growth. Twitter’s mobile advertising revenue now outpaces what it makes on the web (PC-based). So, the point is: If Twitter can, why can’t Facebook!
- One of the primary reasons of the standout performance of Twitter was its integration with iOS, which brought it right in the hands of millions of users of iPhone and iPad. Facebook also is trodding the same path, with iOS 6 accepting the social network with open arms. And do not forget the recent integration with WordPress: Facebook ‘is’ doing its bit to up the usage and users.
- Mark Zuckerberg has time and again commented on the problem of monetizing the mobile version of Facebook. While this shows that the people out there in Menlo Park have taken note of the issue, the recent acquisitions of mobile software companies like Instagram and Face.com are a real good sign. Facebook ‘is’ trying its bit to monetize mobile and make the experience better.
- By the way, did you hear that Facebook was planning to launch its own smartphone?! (If not, read here) If this news is anything to go by, that would mean a venture into the hardware segment. As Google’s experience clearly shows, such ventures into newer arenas are never harmful, given the talent-pool Facebook has and the unique position it exercises in today’s world. It’s good to see that Facebook is trying newer avenues and has that ‘intent’ to progress and expand.
While it is true that the growth of Facebook is slowing down, it is still doing well in numbers. Then, it has shown the intent of re-inventing itself in both mobile and PC Internet by means of acquisitions and collaborations. May be the IPO mishap exposed the situation in bad light, and created a negative atmosphere all around. My take: Facebook is here to stay, so just relax and check out who pinged you in the last five minutes.
Abhishek Mittal is an engineering student by profession and a creative writer by passion. Pursuing his B.E. in Electrical and Electronics from BITS Pilani Hyderabad, he is the Co-Editor of Gadgetronica and is deeply interested in the latest happenings of the gadget-world. Often targeted as an Apple fanboy, Abhishek closely follows the business strategies of all the tech-giants, and sometimes predict the future too!
16 July, 2012