Facebook – Threats and Opportunities

For a company so young it seems odd to be writing a blog about major competitive threats, usually reserved for more mature organizations,  but at the same time it makes a whole lot of sense.  In the digital age, companies rise and fall from power is accelerating. Microsoft rose to power in 20 years.  It took Google less than ten.   In the last five years no company has risen as high and as fast as Facebook.  If you talk about Social Networking this company is the Goliath in the room.  They define Social Networking.  They have over 1 billion members.  That is a large audience.   They have already done an Academy Award film about its founder Mark Zuckerberg, “The Social Network”.  In the world of marketing it would be the “creme de la creme” of  target markets.  Over one billion people I could target and sell to.  If I had their search patterns I could create unique ads to each individual, thus increasing my average revenue per user.  Why is Wall Street down on this company?  But this is America and we love to compete so for all the opportunities that seem before Facebook there are threats.

The thing about Facebook is it is not so much a website as an internet application.  People spend time there.  Facebook has a real opportunity to capitalize on that time in ways that Google cannot.  It is amazing and worrisome how much time people do spend online.  Sometimes posting pics of what looks like a great time, when in reality it was not as special as it looked.  However when you have such a large user bases you have one of the largest opportunities in internet history.  Facebook has said the key for them is monetizing mobile ads.  It is hard to disagree as Facebook beyond being an internet application is utilized for people with lifestyles on the go.  Whenever and wherever you are, Facebook is where you tell people what is happening at a specific moment in time in your life.    No matter how mundane it may be.

I guess if Facebook wanted with its investor and partner Microsoft a common foe it would have to be Google, though things get a bit dicey after that.  With the launch of its new Social Graph from Facebook they are targeting a more sophisticated experience for developers and end users.  It starts to blur the lines of search and social networking and provides a way for Facebook to monetize its user base.  Though Facebook  has signed on to use Microsoft Bing as part of its Social Graph, I think long-term this partnership may be doomed.  Trying to draw lines of distinction on the web can be tricky and the competitive landscape changes quickly.  One day a partner the next a competitor.  Google and Apple were cozy for a while.  Google however has  taken notice of what Facebook is doing and though Google Plus has not taken off I do not expect Google just to drop their tail between their legs and run.  Facebook will use their own search engine to try to monetize their base and they will attempt to take market share from Google (and Microsoft).  Make no mistake from a competitive standpoint Google will be the company that is top of mind at Facebook.  Their paths are colliding and will continue to collide.

Another company that could cause Facebook trouble is Twitter.  Twitter is the pulse of the internet.  What is happening at a specific moment in time.  If you followed the green revolution in Iran or any other major news event (Cairo, Tunisia, Libya etc..) it seems the entire world or maybe middle east was a flame with “tweets”.  Twitter is in many ways much more fast paced than Facebook.  People post of Facebook an event they attended or something that took some amount of time to explain and to happen.  Twitter is very impulsive.  How many athletes, actors, politicians etc..have tweeted something very impulsive and ended up sounding moronic?  The number of apologies for ill-advised tweets at times is nauseating.   But Twitter moves fast and in the age of the internet there is value to that speed.  Can Twitter monetize these rash impulses?  Possibly.  If they do they can realize revenue very quickly.  What that number is I do not know, but I would bet it would start with a “B” and would be plural.  Twitter is also the main competitor in the mobile ads space.  Just like Facebook, Twitter is for people on the move.

Change happens quickly in the consumer space and changes can be generational as we move from one age group to the next.  Remember Facebook was not the first.  The first was MySpace.  Can Facebook maintain and create new excitement?  That is going to be an interesting test for them moving forward.  There are signs that people are getting tired of Facebook.  Is there another phenomena that could take revenue away from Facebook?  Always.  That is the nature of the internet beast.  I key challenge for Facebook will be staying in front of change, staying in front of disruption.  New phenomena happens and our happening with more frequent regularity.  the velocity of business is alive and well.

Moving forward I will be interested how Facebook copes with being a publicly held company.  What I see so far I like.  Despite the negative press surrounding their IPO they seem to have remained calm in the face of this scrutiny   This starts at the top with their founder and chairman, Mark Zuckerberg.  He strikes me of having that Bill Gates like demeanor when he talks about Facebook and the future.  The vision of the future and where Facebook will play in that future seems understood.  In the early days of Microsoft, dreaming of a PC on every desktop and in every home, Microsoft understood it destiny.  Then a combination if the internet and the DOJ happened and Microsoft seemed to get lost in the technological woods.  Those legal winds seems to hover around Google these days but as privacy issues evolve and if Facebook maintains their lead this could fall into their domain as well.

Chapter One of Facebook is nearing its end and we are waiting for the next big breakthrough.  A mobile device?  Zuckerberg says no.  Will it be Social Graph?  Still too early to tell.  Are there other opportunities that they may seize that could create new competitors.  Retail?  Then you bring on Amazon.  Maybe possible takeover targets?  What about Yahoo?  I am sure they would much rather be a part of Facebook than Microsoft. It is going to be a fun and interesting journey.  One I am sure I will blog about later.

Good Night and Good Luck

Hans Henrik Hoffmann March 12, 2013

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