Facebook’s Greatest Threat
June 26th, 2007 | Categories: acquisitions, marketing, markets, networks, social media, strategy, trendsFacebook continues to grow at a staggering rate. Though it can already be considered a mammoth, it still has much upside left. The recent introduction of the Facebook Platform will simply promote further growth. The value proposition for any company looking to integrate is quite obvious - a massive, loyal user base. Just ask iLike. The ability to piggy-back off such a large network is a huge advantage for any early-stage companies.
With all this growth, positive outlook, and momentum, one must ask, “What is going to stop this Facebook train?”
An IPO: Going public isn’t as glorified as it’s hyped up to be. Priority quickly shifts from satisfying users (or consumers) to satisfying shareholders. In other words, less attention is focused on the user. Innovation and feature sets are set aside so that business development and revenue generation can manifest.
Going public isn’t a dream. It’s more of a nightmare - especially for a user-centric, consumer-based web company. This is the scenario faced by Facebook. Rumours and gossip continue to circulate about a pending IPO in late summer or fall. Simply put, the possibility is quite real. Though raising capital does provide the ability to bring on added resources, the dilution of equity and ownership is a strong argument against such a proposition. Anyone whose ever had to deal with numerous stakeholders knows that ensuring the happiness and satisfaction of everyone is near impossible. Financial obligations move to the forefront. This usually means that the user is left to the demise of a fiscally-conscious executive posse and a board of directors, rather than a team focused on the user experience.
Another extremely plausible case is…
Social media collapse: Think back to what happened to Digg. Should Facebook choose to betray users, hide or lie about an issue, or provide non-disclosure around a given policy, and users find out about the blunder, watch out. The very mechanism that spurred viral growth and adoption may work in a counter-productive fashion.
Here are a few other, less likely cases…
A sale: As is the case with many takeovers and acquisitions, the user base of the little guy gets disgruntled. All of a sudden, the policies and corporate culture of the start-up are subject to the red tape and bureaucracy of the over-arching big guy. Many users feel uncomfortable and betrayed in a situation such as this, and defect to a similar product/service where they feel more at ease.
Complacency: Though we have not witnessed this as of yet, a failure to innovate may signal troubles for the company. Having said that, this is probably the least plausible and least likely threat to the company. Time and time again, Facebook has displayed a strong willingness to provide innovative features . For this reason, I have my doubts about the complacency of the company - unless of course, Mark Zuckerberg finds more value in yachting and spending time in the Bahamas rather than company strategy.
What do you think will slow down Facebook’s exceptional growth?