First let me clarify that due to my line of work I do not invest personal money into any public tech stock. That being said, even if I did, I would not put my own money into Facebook when they go public.
This has been an interesting week for Facebook. They acquired an extremely popular piece of software for iOS and Android called Instragram for roughly $1 billion dollars. Instagram had an extremely loyal, engaged, and opinionated customer base (judging by their harsh reaction to the acquisition). In fact, fellow Tech.pinions columnist Patrick Moorhead wrote in his Tuesday column about the conversation he had, via text message, with his daughter after the deal was announced. If you haven’t read it already I encourage you to read it as she very deliberately called Facebook stupid and for old people, which is in fact the title of his column.
Column: Facebook is For Old People
Along those same lines I wrote a column for TIME in December entitled “The Beginning of the End of Facebook?” This column led to a raging debate in the comment section as some folks disagreed with me and others felt that Facebook may not be the king of social networks forever.
Facebook Becomes Routine
My premise was simple. I interviewed approximately 100 high school students in Silicon Valley, all who have been on Facebook at least two years and many had been on for four years or more. In every case with every interview the results were the same. They found themselves using Facebook less and less and were generally using it to simply get quick updates of friends and family. Since that column (and if you read the comments) I have gathered over 100 more responses all indicating the same thing. Those who have been on Facebook for a significant period of time see their time spent with the service decline.
Yet comScore tells an opposite story. The year over year increase of individuals average monthly minutes on Facebook is increasing at almost 50% each year. Now, comScore is looking at the total number of minutes not the number of minutes an specific individual averages. I am not sure if it is possible to track this but I would be 99% certain that the average number of minutes per month spent on Facebook actually declines the longer you have been on the service.
In my own experience and in many of the high schoolers I spoke with, the first year or so on Facebook was the most intense. Discovering and keeping up with new or old friends. The lure to share socially and show off all the things you are doing, eating, etc. All of it becomes very addicting, but after a while that drive goes away. This is at the heart where I think the problem with Facebook lies. It commands a high average of a persons time for a short while but then Facebook becomes more of a routine rather than a passion.
The numbers that ComScore is observing is because much of the globe is still having its first year on Facebook. There is also no doubt in my mind that even for those for whom Facebook becomes routine go through a season of more intense usage. Like when a friend or loved one goes on a trip or moves to a different location.
However, even with my theory of average time spent declining and the longer a consumer has used the service is correct, it is only one small part of why I wouldn’t put money into Facebook. Ultimately, however, I don’t believe the time spent on Facebook averages we are seeing today is sustainable in the long term.
The Economics of Pleasing Everyone
The problem I see with Facebook’s business in the long term is that it is trying to be all things to all people. Within that vein of thinking it is also trying to develop an advertising / revenue strategy that is also all things to all people. Generally speaking, when a service tries to be all things to all people, it is not actually good for anything.
In 2008 I was on a panel at the OnMedia summit in NY talking about this very thing. I highlighted a few networks of interest at the time. One was called Dogster.com which still exists today and is simply a social network for those passionate about Dogs. It links people up by region or just by type of dog in order to link up people of like minded interest in dogs or even certain types of dogs.
Similarly a few years prior I was spending quite a bit of time with the folks of LaLa.com and its founder Bill Nguyen. As you may know Apple has since acquired LaLa and used its technology to build Ping into iTunes. The premise of LaLa.com was simple in the beginning. Link people together who had similar tastes in music and let them help each other discover new music. The results were as expected as for quite a length of time LaLa.com’s average time on site per customer exceeded two hours per day. The allure in the case of LaLa.com was like minded people and the discovery of new music. Lala’s customer base continued to spend significant time on the service until LaLa changed their strategy.
This is the power of vertical social networks and where I believe the best advertising strategies will lie in the future. In the case of Dogster.com the community is an extremely interested one in all things related to dogs. If I was the head of marketing at Purina, would it make more sense for me to advertise on Facebook or Dogster? Similarly, how about social networks for car lovers / aficionado’s, mothers, fitness fanatics, artist lovers, etc. The total size of one of these vertical networks may not be nearly as big as Facebook’s but the target audience would more engaged, more targeted, and more passionate about the interest and thus more valuable to advertise to in my opinion.
We are already seeing these vertical networks creep up and I assume we will see many more in the future and this reality isat the root of my concern over Facebook’s long term sustainability as a profitable business. My concern is that these vertical social networks will become more valuable to brands and advertisers and command more of their ad spends than does Facebook.
The bottom line is that if I am a brand looking to advertise to a certain type of consumer, I am going to want to go where those consumers are in big numbers. My belief is that brands will find more success marketing with vertical social networks that are oriented around special interests rather than a network like Facebook which is trying to be all things to all people and not doing a good job of it.