There has been plenty of concern over Faceook since it's recent flotation with much speculation surrounding it's ability to survive financially. I'm surprised at yet another multi-billion dot com affair but this aside I see FB's problem as two fold – it is being eaten up by spam accounts from within is one half and the damage that has been done to the brand by the IPO is the other.
First – my surprise. Frankly I was stunned at all the excitement surrounding the lead up to what I saw as the most unattractive stock sell off in history. How many times have people jumped up and down with excitement before a dot com share release only to realise how bad the idea was later. And yet they seem to have learnt nothing.
As with so many of the past flotations there were the usual flags. Here was a service that was incredibly popular but did not make enough money to survive as a viable business. Now in the nineties this was known as 'burn rate', the more a dot com was loosing the better (for no apparent reason).
If I started producing a drinkable beer and sold it at cost my brand would be very popular, it might become the number one global 'pint' if I chose to make no profit. And it would seem as though that would be the ideal time to take my business onto the stock exchange – yes you would be able to buy shares in the 'most popular beer on the planet'. Don't worry about the financials.
This aside my biggest surprise really was that people only started flapping and talking about what a bad business Facebook is after the shares had gone out the door. In the lead up it was all excitement, as if mentioning the downside would make any writer the laughing stock of the room (if you'll excuse the pun).
But what's done is done and the FB management team are a great deal richer than me now so there is definitely a case of sour grapes somewhere round here. This aside I am not the first one to question if Facebook will be around for long. Issues already raised include:
- Will the current management really care any more now that they are multi-millionaires?
- The company generates revenue but it's profits are pitifully low
- Can expanding into new countries and territories really help?
- Is there really a future in FB ads is big fish like GM are pulling out?
I want to add a couple more. The issue of spam and the longevity of brand.
Most Facebook users are unaware how the service is currently being weighed down by spammers but the business of selling 'likes' is growing exponentially. You only need an email to create a FB account and it's possible to generate thousands of those within minutes. So for the tens of thousands that join FB every day, an ever greater percentage are people that do not exist.
Then these users who do not exist start 'liking' lots of different websites. To make themselves authentic many post comments on their walls and upload images to their photo albums. In other words they use storage and bandwidth resources. The one thing they don't do is click on advertisements or carry out any other activity that could bring Facebook revenue.
This first issue will cause a knock on effect to the second - brand perception. So far Facebook has built a trusted brand with widespread awareness. But if it became common knowledge that 'likes' on any page meant nothing (i.e. a website with 3,425 'likes' might just have purchased them) then webmasters will realise there is nothing positive about pushing their FB page. In fact thousands of 'likes' might actually be harmful as it would create suspicion rather than respect. Better to have no FB page at all …
And so the great social networking experiment would start to unravel. If webmasters don't want to be 'liked' a huge piece of Facebook's fabric will be unwoven.
That's the first blow to brand. The second is happening offline in may ways.
Services like Myspace and Friends Reunitied were, to some extent, outpaced by Facebook. But on the other hand they were also seen as dated. The next generation rarely wants to associate itself with the brands of their parents.
Friends Reunited is trying to relaunch itself but now that it's name no longer matches it's goal things do start to look a little strange. Ultimately however it is just no longer a fashionable 'brand'.
Facebook is about to hit the same bumper. Scandals around their share issue will undoubtedly undermine trust in the name as a whole. If they can rip off shareholders and not show the slightest sign of guilt, what could they do with my data? How can they claim to be on a 'social mission' and yet act as the world's most ruthless capitalists?
Then we hit the next phase – when people stop liking a brand they look for alternatives. Something in the human psychi that says we really don't like things which become to dominant in the world. Hence Internet Explorer's gradual fall from grace, Microsoft Office's loss of ground to Open Office, the erosion of iphone's market to smart phones, and on goes the list.
It seems we don't like the mighty when they aren't well behaved and Facebook's moral fibre is being exposed in a way that is not making users want to cuddle up. Worse still for the social networking giant there are now plenty of other alternatives which are far more focused.
If we like someone's photography we can follow that on Flickr without having to know all the other personal events going on in their lives, if we appreciate someone's expertise better to have their twitter feed, if we see them as a valuable colleague it's clearer to connect with them on LinkedIn.
It's rare that when we like someone, we like everything about them. A minute by minute update on what they have just done or what they are about to do or the pen that they just dropped on the floor is only for family and closest friends.
For the rest, to drown out the noise and use our time better, we need to be focused and keep in touch with specific people for specific reasons. This would then leave Facebook as a fun place for college students who might click on ads but rarely buy the product. Advertisers, seeing that there is no return would withdraw one of the very few sources of income that FB relies upon for it's survival …
And so after making Mark and a few other people very rich, it would simply fold in on itself.