Will Facebook Become Outdated and End Like Orkut or MySpace
What goes Up must Come down is well known phrase applicable to everything. Today, it is an era of Facebook but How long will it survive? Will the graduates of year 2020 use Facebook to communicate and share as we do? Looking at the current scenario I fear if Facebook will have a miserable death like Orkut or MySpace.
Facebook is a FAIL as Public Company?
Recently, Facebook opened its capital to investors in stock market in the United States. The initial public offering, or IPO, has achieved incredible $104 billion of market value. The initial euphoria has made many people excited about the idea of investing in social network fortune.
The excitement, however, short-lived. At the moment of writing, the company already has an estimated value of only 48 billion. Still looks pretty, but it is important to understand that in a few months, the value dropped by half. Some financial market experts says this is normal as part of the process. There’s always excitement at the beginning of the IPO. This exaggerated optimism means there is a fall after a peak rise and then it tends to stabilize.
But what does this has to do with the success of social networking? Facebook may have reached 104 billion U.S. dollars worth, but the company is not exactly the most lucrative of all. According to information provided by the company itself, in 2011, Facebook had 3.7 billion dollars in revenue. You see, revenues, not profits.
In December last year, the company had 845 million registered users. Let’s calculate the average for the year at 700 million and divide that figure by the revenue collected. We arrive at the value of $5 per year per person. And we find that about 15% of gross revenues come from just one company, the social game developer Zynga, we realize that the system is a little fragile.
How To Monetize Facebook: Biggest Problem
The Facebook advertising system is not very profitable for the company. Few people actually click on the ads, making it far less profitable than Google, for example. This aspect is even more alarming when we consider the fact that most users have access to the social network for smartphones only, i.e. the ability to display ads on these devices is even smaller.
The number of hits the site is not a problem. Recently, Facebook has achieved leadership in two key markets: India and Brazil. In our country, the Mark Zuckerberg’s social network was able to take the lead with 1 Trillion pageviews.
The problem with Facebook is: the site has nearly 1 billion profiles, but only few consume advertising within Facebook. Large number of companies from different genres are excited about the success of social networking and created campaigns there, most of these advertisements are poorly developed and fails to attract the attention of enough people.
Recently, General Motors, one of the largest companies in the global automobile industry, completely eliminated advertising campaigns on Facebook. If one of the largest companies on the planet is just not interested in advertising on the main social network today, there has to be some problem.
Facebook has what many analysts consider a real gold mine, which is the sheer volume of information available in your database, everything deposited there by the users of the site. This database, according to experts, can scare even the giant Google. But only if the company knows how to use it for their advantage.
According to official data, only 1% of users interact with the advertising on Facebook. It seems that the gold mine that is the amount of information held by the social network is not that interesting, or at least, no one learned to apply that data correctly today.
Soon, the company capitalized on investors, raising billions of dollars, seems to be doing a good job throughout nearly ten years. But on the other hand, it is not bringing the expected return to investors. And that, in the medium and long term, is very bad for any company.
To make matters worse, company didn’t even fulfill the expectations of revenue announced last Thursday (26) in the first announcement of quarterly results. The company failed to reassure its investors, showing no clear plans about their future actions.
Younger People are Losing Interest in Facebook
Facebook is growing rapidly worldwide, especially in Brazil and India. But what about its native country, the United States? In the land of Uncle Sam, the social network had a decline from March 2011 to March 2012 of about 300,000 users.
The younger people on the other hand, did not continue the tradition. According to a survey released by Nielsen, young people aged below 18 years are the least accessing social networks.
Just Another Photo Sharing Service?
When did the great attraction of the network was its able to share photos? Today, there are many similar services that is difficult to choose. This brings us to another interesting fact. Facebook acquired Instagram recently by a billion dollars. The social network is a hit among young people, but profit? To our knowledge, the Instagram never earned a dime.
Why Facebook has invested so much money on something that does not generate profits? It is even easy to explain. One who was interested in buying Instagram was Twitter, which has carried a good part of Facebook users.
So to try to recover one of their greatest differences and not lose any more users, the company acquired the Instagram.
What About Orkut, MySpace and Google+ ?
The fate of almost all other social networks that emerged in the past was the same. Why should we expect Facebook to be different?
When MySpace came in 2003, was an explosion of hits. It was the first time that people could create a profile containing personal data on the Internet, images and other information. With success, the social network passed through the hands of more than one firm.
This was a social network that almost succumbed to the success of Facebook. The company was bought by Newscorp for $580 million. Six years later, the same MySpace sold for only $35 million.
Orkut was never successful, except in Brazil and India. Its huge success in the country reflected what happened with MySpace in the United States.
Google has learned from Orkut and Facebook and launched the Plus. The company’s newest venture in the field of social networks has achieved a record number of entries in its early days. Nevertheless, it is difficult to see any activity there.
Innovation is Necessary but Is Facebook Ready For It?
This all leads us to an important conclusion: what makes a social network loses its appeal among the public? A key factor is the lack of innovation. A stagnated product just tires the audience.
Another point to consider is the competition. With so many products available, which one to choose is a question?
Facebook is still by far the most popular network in the world, and it will not change anytime soon. However, the exact size is what may be their biggest problem. The more people accessing the network, the greater the difficulty of implementing a change. An example of this was the feature “Timeline,” which sparked protests around the world, offending many people.
One of the main efforts of the network is currently expanding the revenues coming from smartphones. To try to improve the situation, Facebook is eyeing the Opera mobile Browser, as it has experience in mobile navigation.
Bottomline
It is difficult to predict the future of the company whether it will lose ground to other social networks. However, it is generally agreed that Facebook needs to innovate and even diversify their services, since no company, no matter what size, is not safe from problems.
Still, I appreciate the efforts taken on regular basis which is quite visible on Facebook. Maybe it is true that something going up will come down but its a sign of Life. It means they are moving. It means they are experimenting. It means they want improvement. And hope these Downs are followed by new heights.
