Why I Would Short Facebook

by Alan Guibord Founder of TAC

How many times have we been enamored with trendy technologies only to get left behind while the rest of the world moves on? I believe that this is true with Facebook. These types of social media sites have flourished and withered on a regular basis (witness Myspace, for which News Corporation paid $580 million in 2005, and then sold in 2011 for $35 million). The younger crowd gets bored easily and have a herd mentality. They will follow the crowd to the next hot thing. You can already see this by the Facebook demographics. The average age of members is getting older by the day. The advertisers see this as well, and it’s only a matter of time before they move on as well. Without both, Facebook is just another Plaxo.

I am not saying that Facebook’s days are numbered, but that they do not have a sustainable model for growth.

It’s OK to use these technologies personally, but very risky to introduce them to the enterprise environment. In doing so, you might be thought of as cool for a short period, but, soon you will be considered behind the curve as new ones emerge, and they will on a regular basis. Make sure that you clearly understand the business problem you are trying to solve before moving forward, and don’t get caught up in the hype

I recently asked for feedback on this subject from a college student I know to get the his perspective. His name is Alan Schay and is entering his senior year at Clarkson University. His comments are below.

Facebook’s growth is limited by multiple flaws of their system. Most prominent flaw is the failure to deliver and capitalize on an effective mobile application. AdParlor recently found that the cost-per-click on mobile is 30% less than web based ($0.42 vs. $0.60), despite the click-through-rate on mobile being 13 times higher than on browser based. This is what most analysts point to when discussing why Facebook is overvalued. However, this is just why Facebook’s revenue projections are overblown.

There is also the issue of why their user growth projections are inaccurate. This more subjective, and pervasive problem is due to Facebook’s attempt to be the hub of all interaction in a user’s life. Sites targeted at specific forms of interaction are booming. Tumblr and Pinterest are where people are going to create and discover content. Twitter is used to interact about mundanities with wide audiences. This is not to say that Facebook has no appeal left, but it is not where people want to spend all of their time. (One study showed a year-to-year drop in visit duration of 21% among Australian users.)

For years now people have been suggesting that the popularity of Facebook shows that people want to share everything with everyone, but that simply is not true. Compartmentalization is a central part of human interaction, and it’s only now that multiple forms of social networking exist that people can let their online personas more closely reflect their real world interactions. The best way to describe it is that while I might connect with colleagues on Facebook or LinkedIn, I have little interest about what they might be saying on Twitter, and no interest in letting them know what artists I like on Tumblr. Like every other industry in the world, social media companies need to accept that there is no such thing as permanent and absolute market dominance, and that different people will use different services for different purposes. If that were not the case, then we’d all be driving Fords, and they’d all be black like Henry wanted.

This further substantiates my position. I hope you found it provocative. We continue to caution our clients to be very careful with social media selections for their companies.