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Four Reasons to Fear For Facebook's Future

I've previously blogged to urge Mark Zuckerburg to beware of hubris, to realise that just as he's created value extremely quickly, it can be disappear just as fast. There are many people out there happy to big up Facebook's Future and I genuinely don't know what's going to happen, but it's always fun to speculate. What are the clouds on the horizon for Facebook?

Here are my Four Reasons to Fear For Facebook's Future.

Loss of interest in large markets. Whilst Facebook most certainly has been growing its user base, its hold over the waking hours of its users has been reducing. We saw how it was poised to drop below 50% of social media visits in the UK. Furthermore there is a growth in other Social Networks. LinkedIn, Tumblr, Yahoo Answers. All these other sites have seen growth year on year, whilst Facebook's share of visits is down by 7% over the course of 2011.

Google might get its act together. After at least three failed attempts to get into the social networking space (pace Buzz, Friend Connect, orkut) Google + is pressing hard to be a serious challenger in the space too. In January 2012 they claimed to have 90 million users (about 9% of the Facebook figure) and are growing fast. An independent analyst reckons that the rate of growth is increasing with G+ putting on users at a rate of about 625,000 new users per day. If right, that will take Google to nearly 400 million users by the end of the year – enough to be a serious challenger.

Facebook shops seem to be a fail. All over the web you see reports of people who plunged into f-commerce. And fairly rapidly plunged out of it. Gamestop, J. C. Penny, Gap and Nordstrom have all closed their Facebook stores. The reason? Their stuff didn't sell and, more importantly, these brands simply found that they got more users, more sales and more control over the user experience through their regular website. It's one thing to sit on someone else's platform, but using the open protocols of the web seems to be a better channel for selling, especially for big brands. In the end however many customers Facebook can deliver, the internet will be able to deliver more.

The growth of specialist social networks focussed around a single interest groups. They seem to be the next big thing and they allow people to interact with folk who share their interests without having to share the whole of their life. You might be a nerd who is interested in freshwater fish, but do you really want to broadcast that to everyone? Google tried to respond to this through the introduction of Circles and Facebook has helped you to organise your friends into categories, but it's pretty clumsy. Wouldn't you rather go to a food sharing site to meet and discuss food related stuff or a fitness site for things to do with fitness? The new sites such as fitrocracy, foodspotting , thumb and, in particular, Pintrest are all mushrooming as people turn to more specialist more focussed networks.

And here we get to the wider point: Facebook aspires to be the mega walled garden, a private space on the internet where consumers will go to do everything: meet their friends, communicate, play games and go shopping. It wants to be a massive intranet controlling the platform adding value to its users and controlling their activities by putting a toll on those that live within its confines. At one point Facebook truly embraced third party developers, but now they're a bit sore. Zynga, for sure, still does really well out of this bargain, but for many others, the requirement to use Facebook credits for payments and other restrictions on developer's freedom has been a real turn off.

It's been a long standing view of mine that, in the long run, wherever open meets closed, open wins. Proprietary infrastructures can innovate faster and can deliver a better user experience more quickly, but, in the end, it's the ability to capture the energy and creativity of the widest possible community that wins out. We see it in Linux and Android.

Another way of looking at this, by analogy, is by looking at the TV industry. Once upon a time there was ITV. Alongside the publicly funded BBC, they were the only game in town – and certainly the only game in town for advertisers. A general-purpose cover-all-interests player. They could extract monopoly rents, but whilst ITV is still a reasonably profitable franchise, its position has been eroded by specialist channels. Surely this is what we're seeing now in the social domain too – a fragmentation as consumers use the open nature of internet to find the more specialist sites that specifically cater to their needs rather than having to drink from the firehose of dull updates from classmates that you wish you'd never reconnected with and inane pictures of their children with messy faces.

Facebook became big by having a service that catered for a specialist segment, college students, and they expanded that into a brilliant widely used extremely profitable service growing like crazy, but will its run continue? I don't know – it's going to be fascinating to see.


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