When you have 900 million active users engaging on your platform, creating free content every minute, you have little to worry about. But when your company becomes a public entity, the growth and profitability becomes a matter of public interest.
That shouldn't be a problem, right? If each user spends $0.50 cents per month, you should collect at least $400 million. So it's quite baffling that Facebook made a loss of $157 million in its first earning after its public offering, sinking the share price to a new low.
The financial results were largely in line with expectations but investors were evidently spooked by signs that the giant social network phenomenal growth is cooling.Accounting procedures requiring Facebook to set aside reserves from restricted stock units before 2011 could be one explanation why Facebook performed below par. But still, 900 million users!
But more importantly, apart from the financial figures, is the number of users engaging on the platform. This is probably what is giving Mark Zuckerberg sleepless nights. A recent study by Reuters and Ipsos shows 34 percent of Facebook users surveyed are spending less time on the website than six months ago, compared to 20 percent spending more time.
Also worrying is that four out of five Facebook users have never bought a product or service as a result of a Facebook ad. Privacy and constant interface changes are other issues the social network is also facing.
But are these recent developments cause for worry? Will Facebook go the way of Myspace? Eventually.
Facebook has reached its optimum use in its current form. It is still quite effective as a content sharing stool, driving considerable traffic to websites. But outside of this (and the occasional commenting, pocking and status updates), Facebook's utility as a social and business tool is diminishing.
Social networks are like political parties; Very popular when in the opposition, but unpopular when they form the next Government. The rallying call that attracted the masses ends, but the sense of accomplishment and 'arrival' only lasts for a while, and then we become disgruntled again.
In its formative stage, everyone wants to be on the social network. We don't want to feel as if we are missing out.
But as the numbers grow and everyone and their friends' friend come on board, all over sudden we want to be unique and 'sophisticated'. We value our privacy more. Our interest wanes, and we look for a new 'social high'. Maybe that's why we are less inclined to answer Facebook's question; 'what's on your mind?' compared to two years ago.
The less updates we see on our timeline, the less we feel like 'I am missing out'. Consequently, the social network dies a natural death after an organic growth fueled by the same content from users.
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