Is Facebook Becoming Obsolete?

From Dave's Bleeding Edge blog:

Last year, I began warning that Facebook was a tech crash in the making. It wasn’t just that the social network had no other business model than mining its own users for their personal data to sell to advertisers. It wasn’t that the service was over-run by sleazy advertisers, viruses and hucksters.

It was because its core users, the tween-to-twentysomething group, is notoriously fickle. One day you are hotter than the teenie rock group Hanson, the next day you are embarrassing to be seen with. Not only that, young people appear to be turned off by the raw egotism of the service.

But that’s not the disconcerting part of all of this. The truly disconcerting part is that the company, now ten years old, admits to this in their annual report, released last month:

“We believe that some of our users, particularly our younger users, are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook.

“For example, we believe that some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram.

“'In the event that our users increasingly engage with other products and services, we may experience a decline in user engagement and our business could be harmed.”

Wow.

In a completely unscientific poll, I asked a few of the grand-kids who used to frequent my page why I no longer see them posting every day. With all of the expressiveness a teen can muster, they looked at me and shrugged.

Of course, Facebook is far from dead. But it is now facing an uphill battle reminiscent of the fall of MySpace. There was absolutely nothing wrong with MySpace, as services go. It just stopped being as easy. As sharing. As cool.

The problems it faces also include some mechanical problems. Users don’t like its constantly-changing privacy policies, as the company scrambled to find something it can sell to advertisers. Its stock, which opened at $38 per share, rapidly slipped to around $25 and has had trouble trying to rise above that level. Its founding shareholders are trying to cash out. Income for the past year was down, expenses are up, and Wall Street has been singularly unimpressed.

Americans, the largest group of Facebook users and the highest generators of per-user revenue, are showing signs of Facebook fatigue. Though nearly 2/3 of online American adults use Facebook, a Pew Internet study release on February 5, 2013, shows:

  • 61% of current Facebook users say that at one time or another in the past they have voluntarily taken a break from using Facebook for a period of several weeks or more.
  • 20% of the online adults who do not currently use Facebook say they once used the site but no longer do so.
  • Only 8% of online adults who do not currently use Facebook are interested in becoming Facebook users in the future.

And the company has added to the angst of some users by initiating an unpopular “Timeline” format, permitting paid postings to the news feeds of all users, and an ever-increasing slew of ads.

No one is suggesting that we abandon ship at this stage, but firms that have invested heavily in a “social media strategy” to enhance their market share may want to take a stealthy look at their hole card. After all, in a world in which it is hard to quantify the value of social media, it becomes even harder to quantify the value of a social medium that people are fleeing.

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