Face Facts

Murph FacebookSo as it celebrates its 10th birthday this week, should Facebook be popping the champagne corks, or preparing to pull down the shutters?

It’s a question that has been thrown into sharp relief by a recent study conducted by John Cannarella and Joshua Spechler, two researchers from Princeton University. They likened Facebook’s meteoric growth to that of an infectious disease, and came to the conclusion that while it may currently seem unstoppable, its progress will inevitably be halted, to the point that, by 2017, just three years from now, it will have shed 80 per cent of its current 1.23bn users.

What will halt the Facebook ‘epidemic’, they conclude, won’t be the emergence of something better, but the prevalence of the tribe mentality that leads users of one social network to abandon it with the same enthusiasm with which they embraced it in the first place, leading to an inevitable decline in its worth.

Bargain buys
There’s plenty of evidence to support this theory. You only need to look at Bebo, bought by AOL for $850m in 2008, and sold back to co-founder Michael Birch last July for $1m. Or MySpace, launched in 2003, bought by News Corp two years later for $580m, and then sold, in 2011, to Specific Media Group and Justin Timberlake for just $35m. Those with longer memories and more years under their belt will also remember Second Life which, a decade or so ago, was being touted as a place where any self-respecting brand simply had to have a presence, but which now looks nothing more than a fairly scuzzy online hangout.

The same theory applies beyond social networks, of course. 20 years ago, did anyone really see Microsoft playing second, or rather third, fiddle to Google and Apple in the tech stakes? And even if you had predicted Microsoft’s relative demise, it would have been a brave man to bet that it would come at the hands of a resurgent Apple.

Where social networks are concerned, however, the virality of the abandonment is inevitably amplified, to roughly 11, by the fact that social networks are inherently, well, social. Facebook also added fuel to the fire when chief financial officer David Ebersman, admitted on an earnings call last year that the company had seen a decrease in daily users among younger teenagers.

So does Cannarella and Spechler’s analysis have legs? Well, the fact that it is based largely on looking at the number of times the word ‘Facebook’ is used as Google search term seems pretty basic. Google searches on this term have indeed tailed off since peaking in 2012, but this fails to take account of the number of people bookmarking the site on their PCs – and more to the point, the fact that most Facebook usage now takes place on mobile. Facebook app users, of course, don’t need Google to get their fix, and I suspect that many of Facebook’s mobile web users barely know that other mobile sites are available on their phone.

Facebook’s latest results also do little to add credence to the Princeton study’s conclusions, with Q4 2013 revenues of $2.59bn, up 63 per cent on Q4 2012, and made up almost entirely of ad revenues, of which mobile ad revenues contributed 53 per cent.

Emerging markets
Facebook’s efforts to attract new users in emerging markets are also paying off. Figures from YouGov show that in Brazil, which is now Facebook’s second biggest market after the US, in the year to September 2012, the average time spent on Facebook rose by 208 per cent to 535 minutes per month, whereas globally, it fell 2 per cent to 361 minutes.

Facebook has also gone to great lengths to make its services available to users in other emerging markets where smartphones are less prevalent through initiatives like Facebook Zero, a text-only mobile site which many users can access for free; along with Facebook for SIM, an SMS-based version of the service. And of course, if Facebook really feels that some young upstart in a garage is about to eat its dinner, it can always buy them, as it did with Instagram and, just last month, Branch Media.

Clearly then, the Princeton researchers are talking rubbish. And yet…when you look at the demise of Bebo and of MySpace, it’s difficult to entirely dismiss their theory, however outlandish it may seem.

To date, Facebook has survived, and thrived, on its ability to give its users more of what they want, including – to the surprise of many pundits who argued for years that a social network is not a place people go to be sold to – advertising. Ultimately, whether it proves Cannarella and Spechler wrong will depend on whether it continues to do so, through constant innovation and reinvention, balancing corporate imperatives with user desires. At the moment, it’s ticking those boxes, but as the stories of Bebo, MySpace and others make all too clear, in the social networking game, you’re only ever a small change in fickle user sentiment away from failure.