The Future of Facebook
Facebook’s stock took a virtual beating in the weeks
after the company’s historic IPO in May — obviously a
surprise to many aggressive investors on Wall Street,
but not so much to those more closely linked to the
evolution of the Web.
On the surface, more than 900 million active users is an astonishing vote of confidence for the social network’s global popularity — and no one is denying that. One or two layers beneath the surface, however, is the long-term viability of Facebook’s advertising business, which has been at the center of the controversy surrounding its “failed” IPO and which remains to be accurately evaluated — leading to numerous lawsuits and countless livid investors.
But most important to this discussion — and to Web businesses everywhere — is the overall future of Facebook and, especially important, why it may not have the one we once envisioned. It’s a clichéd term, but Facebook has led the charge of the Web 2.0 movement, which has been a critical development in the evolution of the Internet and for all online businesses. The question is, will Facebook successfully make the transition into the next phase of the Web’s evolution — and many believe that answer is no.
Most Web historians break down the Internet’s evolution into three phases. The first phase was the period from the mid-1990s to the early 2000s that was defined by products such as Netscape and Internet Explorer, portals such as Yahoo and AOL, and other companies such as Amazon, eBay and Google. The second phase, call it Web 2.0 or the move into social media, began around 2002 and was made possible by companies such as MySpace, Facebook, LinkedIn, Digg, Reddit, StumbleUpon, Groupon, etc.
Some businesses have transitioned from phase one into phase two much more successfully than others have, and some will have a far more difficult time transitioning into phase three — the mobile phase that we are entering right now — than others will. I believe that Facebook’s failure thus far to effectively monetize the mobile platform puts the company’s future at risk, and I’m not alone.
“In five to eight years, Facebook is going to disappear in the way that Yahoo has disappeared,” Eric Jackson, founder of Ironfire Capital, recently told CNBC. “Yahoo is still making money, it’s still profitable, still has 13,000 employees working for it, but it’s 10 percent of the value that it was at the height of 2000. For all intents and purposes, it’s disappeared.”
It’s unlikely that 1 billion users are going to vanish from Facebook in the next few years, turning the world’s most popular social network into a ghost town. But rather than its present reputation as a visionary company that changed the way we communicate — which is what the original mission was — what is now at stake is Facebook’s potential reputation as one of the most relevant, influential companies in the history of the world — which is what that mission has since become.
Until it can overcome the challenges it is currently experiencing with mobile monetization, there is as much of a chance that the Facebook legacy will more closely resemble Yahoo’s as either Google’s or Apple’s. While on a much smaller scale, of course, the same applies to our own Web businesses. To be successful over the long term, we have to remain flexible and open-minded. We have to not only accept change but embrace it and position our companies on the crest of the next wave rather than resist it and become crushed by its force.
Right now that wave is the dawn of a new mobile era, and it is vital that we find the optimal positions for our online businesses before it’s already upon us. We will help you discover the different ways to do that in next month’s feature article, but in the end there are really only two options to consider — adapt or become irrelevant.