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.
9 thoughts on “Why I Wouldn’t Invest in Facebook”
Haha facebook is lame and for old people. I was a freshman at IU in 2004 when facebook launched at our school. It was awesome when it was college-exclusive and we didn’t have to worry about our grandmas/employers/creepy randoms. I used to be in a facebook group called “I smoke the dankest weed on campus” for christ’s sake. Try that today. Girls used to post scandalous pics and us guys could anonymously creep those pics lol. It used to be a beacon of free speech and hope for the young. I do know that it has privacy settings and I can set who views what, but it just feels weird excluding certain people and looking over my virtual shoulder all the time. That’s why my page is a shadow of it’s former self. Everyone can view my name, profile pic, birthday, graduation date and that’s it. Facebook lost it’s niche and I’m definitely not the only one who feels this way.
“It was awesome when it was college-exclusive and we didn’t have to worry about our grandmas/employers/creepy ”
“Girls used to post scandalous pics and us guys could anonymously creep those pics lol.”
Sounds like “creeps” have always existed on Facebook.
“I do know that it has privacy settings and I can set who views what, but it just feels weird excluding certain people and looking over my virtual shoulder all the time.”
If you feel guilty about doing something it probably means you shouldn’t be doing it in the first place as you know it’s wrong.
Haha believe me I no longer smoke the dankest weed or creep girls on facebook. I’m just speaking from a college student’s/young person’s perspective that it was a lot more fun/free before they sold out. Look at people’s posts/updates nowadays. There’s so much junk/ads it’s just a pain to navigate anymore, and somebody’s bound to come up with a better product for that particular niche and every niche in general. This is a good article I agree with. In the meantime keep posting about that new brooks brothers tie you just bought, as if anybody cares. Just don’t invest in facebook.
Well thought out, as it deals with advertising and financial viability and growth. However, appealing to “old people” (25+ haha!) isn’t such a bad thing. There are a lot of us. Some trends are temporary fads, others find a more permanent spot in the culture. FB stores and relates family history, events, relationships and allows people to find each other all over the world. Relationships can be discovered and renewed. Reunions, personal and corporate, can be arranged. Long distance relationships can be maintained on a much higher level. The fact that people don’t maintain an addiction level of involvement is a good thing in life….but not necessarily for advertisers and investors, which is the ultimate point of the story. I guess FB better not sit on its laurels or it will go the way of the dinosaur! Of course, all of us “old people” control an awful lot of the wealth and spend an awful lot of money! Just sayin’!
Another reason for not putting money into Facebook is that they have a very low user satisfaction rating.
Dude, this whole article could have been written with just three words: ROI meets LOL.
haha, excellent comment. However if you look at the comments on my TIME column if I would have done that I would have been called all kinds of nasty names 🙂 But I agree, I don’t think the ROI is there for many advertisers on FB..
I do know that it has privacy settings and I can set who views what, but it just feels weird excluding certain people and looking over my virtual shoulder all the time. That’s why my page is a shadow of it’s former self. Everyone can view my name, profile pic, birthday, graduation date and that’s it. Facebook lost it’s niche and I’m definitely not the only one who feels this way.
Facebook just seems to be on a downward spiral I stopped using it more than a year ago other than checking in to be nosey occasionally. This new timeline nonsense does not encourage me to go back either!!