Editor’s Note: Muir Monahan is a Social Media and internet marketing specialist that has worked in three major markets as a freelancer as well as for a well-known Search Agency. He writes on social media and SEO topics on occasion.
Facebook is a massive, sprawling Internet Empire with over a billion users and a market presence that make it one of the top IT businesses in the world. And yet the company is less than a decade old and though its growth has been exponential it has only now started to face the true challenges that every IT business has to face sooner or later. Facebook needs revenue to support itself.
Old-school real-world product companies have always had to balance their checkbook on a month-by-month basis because they had to juggle production costs with sales. Advertisement supported Internet businesses like Facebook have very few associated costs and high profit returns which is great in their growth phases, especially as advertisers are quick to jump onboard when your start-up is thriving. But once your user base starts to stabilize it’s time to find ways to sustain your company, especially if you’re now publically listed.
Facebook has been doing that for a while through its expansion of advertising, EdgeRank and its new follower toolkit for advertisers and Search Agency professionals. Unfortunately like with many an Internet company’s transition to the greater market there have been problems. The backlash against the promoted post tool that saw Internet celebrities and companies lash out at the social networking giant was just the beginning.
Lately more and more people have been quitting Facebook, an unlikely development considering the fact that it is extremely popular in the mainstream and that there isn’t a ‘rising star’ contender network out there. It does however make more sense if you take into account the fact that the estimated average duration of an online ‘empire’ is 11 years. And while companies like Google or Microsoft certainly break that pattern they are both well known for diversifying their assets and finding new sources of revenue or at least new applications of technology that tie-in well with their existing products. Companies that don’t diversify, however have grimmer fates.
Perhaps the best example is AOL. AOL was once the very foundation of Internet in America, the main way that users interacted with the Internet as well as published and hosted their content. Twenty years later AOL still exists but it is nowhere near as relevant as during its heyday. Other companies like Altavista have vanished entirely whereas some like MySpace are trying to reinvent themselves to limited success. Could this be the future of Facebook as well?
There are arguments both for and against this. Some people say that thanks to its ubicuity and its mainstream adoption by less tech-savvy people Facebook won’t fizzle once it’s no longer ‘cool’, others point at its integration of Skype or its soon to come ‘mystery announcement’ as proof that Zuckerberg is indeed serious about diversifying its business ventures.
The arguments for Facebook’s demise are more grounded in the company’s poor performance in the real world so far and the general trend with social networks to fall apart after they become too big than any observed downwards trend. But the business model that the company has been running on for a long time is inconsistent with its ambitions and the social networking giant will need to find new ways of monetizing its huge user base than just relying on advertising and social media campaigns ‘promoted’ by a rare few big spenders. The future is an undiscovered country for Facebook but it will be a challenging and exciting one nonetheless.