Does Facebook have a future?
Jinfo Blog

By Sarah Dillingham

Abstract

The Facebook valuation has stirred up a great deal of press debate. It is expected that the IPO valuation will come in at $75-100 billion, giving Facebook a higher value than Boeing, American Express and Nike. Unsurprisingly, people are wondering if this is another dot com bubble. Social networks haven’t fared well following buyouts so there is a lot of speculation on Facebook’s future.

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The Facebook valuation has stirred up a great deal of press debate. It is expected that the IPO valuation will come in at $75-100 billion, giving Facebook a higher value than Boeing, American Express and Nike. Unsurprisingly, people are wondering if this is another dot com bubble.

Social networks haven’t fared well following buyouts so there is a lot of speculation on Facebook’s future. “How News Corp got lost in MySpace” explains how quickly a decline can happen, as does this article on Bebo.

Facebook has several differentiators that should keep it going for a while yet. It has market dominance with 845 million users. Its wide user demographic cuts across all ages, whereas other networks were skewed to specific demographics (Bebo was for kids and MySpace was for teenagers/young adults). Everyone is on Facebook including your mum. While this might not always be a good thing, it does mean that you have one place to go to interact with the majority of your contacts.

One thing Facebook lacks is editorial content. The draw of social networks is that they allow interaction with others and Facebook have not been distracted with setting up editorial units. Instead, it has focused on making it easy for users to interact and create and share their own content. Mark Zuckerberg credits “The Hacker Way” for this, by giving freedom to developers to continuously improve the product.

As a result, users have a high level of personal content invested in the site. It’s difficult to delete your profile when all of your favourite photos are in one spot, including photos taken by other people. The amount of time and energy Facebook has put into making it simple to tag people in photos pays off by making people stick to the site.

Facebook's integration with mobile and other products (e.g. online newspapers and other social networks) makes it very user friendly. Other companies do their advertising for them by featuring the logo to indicate their integration.a

So what could possibly go wrong?

Well, for one thing, Facebook will now be beholden to shareholders, which is where things can get sticky.

Facebook’s business model generates revenue by targeting ads to individual preferences. This puts it hard up against the privacy concerns that turn so many of their users off.

It’s quite astounding how easily Facebook has managed to get people to volunteer pieces of personal data freely that traditional marketers would have struggled to obtain. This means if you are not paying then you are the product, as discussed here by Rory Cellan-Jones of the BBC.

While Facebook has some history of listening to users (remember when it killed all the terrible pirate/zombie games? The changing of privacy policies?) it will be under pressure to deliver high returns.

The question is will users cling to the benefits of Facebook for the long term or will they leave if privacy concerns become too acute? Certainly one to watch.

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