Has Facebook reached its own glass ceiling?
The glory days may be over for Facebook, which saw rapid growth and adoption for the latter part of the last decade. But the good ‘ol days are slowly fading away for Zuckerberg and crew, with shares falling 1 percent today following yesterday’s losses. Has Facebook reached its own glass ceiling? Isn’t everyone who wants to be on Facebook, on Facebook?
Rory Maher, Analyst for Capstone, thinks so. Maher used “proprietary software” to track Facebook growth in 200 countries over the past six months. His research claims Facebook lost 1.1 percent of U.S. users, likely due to privacy concerns. In countries where Facebook adoption exceeded 50 percent, Maher says 9 out of the 23 saw growth in the past three months.
This research is not surprising, Facebook can’t ride the social network wave any longer – at least in countries such as the U.S. and Europe. Market differentiation, mobile adoption, and location-based services will be crucial for the company’s success. Tight integration, such as the upcoming iOS 6 release, will be key for the company’s future.
Facebook is suffering the same problem as a lot of technology companies: how to innovate beyond their core product. With nearly everyone who wants to be on Facebook, on Facebook, they have to look for other ways to grow. Social networks, such as Google+ and Pinterest, are only going to cannibalize Facebook growth. Quite frankly, buying Pinterest makes a lot of sense for Facebook.
Privacy concerns and the idea of over-sharing are only going to grow, at the cost of their user base. As recruiting becomes increasingly social, individuals are going to be less inclined to post pictures of their drunken escapades and share them with their network. To save itself, Facebook must address user privacy and streamline their account controls, instilling a sense of trust amongst its users.
Coincidently, this goes against my next point: advertising. Social ads are going to outpace AdWords within the next three years. This is a huge growth opportunity for Facebook, but it coincides with bigger privacy issues. Promoted Posts, for example, while great for brands, impede user privacy. The same applies to promoted Pages, which show your friend endorsing a page, such as Southwest Airlines.
Doomed from the IPO
Maybe Facebook was doomed from the moment they went public. This is partly due to the inflated valuation, which, judging by the actual share prices today, was too good to be true. Shares of Facebook slid to $27.15, nearly a third of its value. It is unlikely Facebook will recover these losses unless they make serious, head-turning changes.