Facebook: Time to worry?
Facebook just crossed the 300-million user mark, and they are cash flow positive. Is it now time to worry?
Business lifespans seem to be getting shorter and shorter. When I first started covering technology almost two decades ago, the major players were old-line technology companies, like IBM, that had made smart transitions into the modern computer age. There were upstart hardware companies—Apple was still considered one—and a slew of software makers who did not have the heavy manufacturing costs and were able to bring out products in relatively fast cycles. There was perceived chaos as technology went through upheaval in the hardware business (AT&T taking over NCR, for example) and more and more manufacturing jobs moved overseas. But troubles used to bring a slowish spiral in the hardware and software businesses. When a company struggled there was a mourning period because people had a sense of brand loyalty. I don’t think brand loyalty exists very much anymore and that goes across industries, but technology companies have tended to seek marketshare more than money (Twitter is a good example) and so our expectations have changed. Brand loyalty has diminished and companies tend to go bust much more quickly.
During the Internet Boom, I watched companies with no real value become overvalued. I remember going to a launch party for a company that had enormous buzz. I asked the CEO about his company’s strategy and he said he hadn’t figured it out yet. Of course, many of these Web businesses were over-hyped and they went bust. Technology, including the non-Apple hardware business, lost its perceived value over this time period and the bit hardware companies have fallen away. I think the nature of today’s tech companies and our very culture has made most companies expendable in our minds. Just ask the folks at MySpace.
Facebook is doing well, and yet I wonder if Facebook will even be around in five years. I remember when AOL was all the rage. (After many tough years, AOL has finally been able to re-invent itself.) And I can list many dot-com busts (boo.com, for example) that generated excitement for a limited time. The tech children of the so-called “New Economy” are typically faddish outfits with short business lives. The real value in many of these Web-based tech companies come from users. That should worry companies like Facebook. A decade ago people were passionate about chatting on AOL because it was seen as cool, but then they moved to another party. I remember in years past having loyalty to a brand whether it is a car, a computer, or even a cell phone. I like Facebook. I like Twitter. But do I have loyalty to them? No, I have loyalty to the user-generated content, and that is not something they control. And that would make me very nervous.
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There are positive signs for Facebook’s viability in terms of its relationships with customers. It was just ranked the 10th most trusted brand in this study, and it’s in good company: http://www.insidefacebook.com/2009/09/16/study-facebook-now-the-tenth-most-trusted-company-in-the-us/
It’ll depend in part on Facebook’s ability to keep pace with the growth and adaptation of mobile devices. Facebook has been surprisingly nimble for such a big company. They’ve become, for me, an interactive phone book. I don’t need to keep email addresses and phone numbers because I can find people on Facebook; there’s value in that. We’ll see what happens as Twitter evolves, and when Google Wave and Microsoft Vine launch.
I agree with you, it’s the people not the tool. I just don’t see FB having a high-flying future, the tools always have built in limitations. Remember from the pre-AOL days when the WELL and ECHO were hip, not to mention various BBSs all through the 80s?
So, I think you are right on the money … no way will FB be as popular 5 years from now. Hope its not too self-promoting to say I actually wrote about the very same thing a short while back ( http://trueslant.com/toddessig/2009/08/31/people-leave-facebook-doh/ ).
Though it still seems relatively new, I’ve been using Facebook for about five years now, which should speak somewhat to its staying power. I think people who have been using it that long think of it as another e-mail account – it’s engrained in my daily routine.
All great points and perspectives. Thanks for reading.