Monday, July 30, 2012

#Facebook faces twin threats

Last week Facebook announced an operating loss of $157m (USD) from April to June and it's share price fell 12% at $23.71 - remember Facebook shares were priced at $38 when it listed in May. This was widely reported in the media, for example by the BBC. That report, and may others, blames Facebook's troubles on its long standing problem of "mobile monetisation." Basically that means it's difficult to place adverts on the small screens of mobile devices. As people increasingly use their smartphones to check their Facebook they don't see as may adverts as they do on the larger screens of PCs; hence Facebook is getting less revenue.
   However, Facebook also faces another more existential threat that constantly lurks in the shadows. What if, one day in the future, a new cooler social media app is invented and all the cool kids and hipsters abandon Facebook for this new phenomena, leaving Facebook a realm that only their grandparents still visit. As we know the web is a constant well spring of innovation. Facebook was once the new kid on the block and remember what it did to MySpace. Facebook can meet this challenge by using its bank balance to buy up innovators like Instagram, but that only works if they want to sell. Facebook itself famously refused to be bought out by many suitors over the years.  I'm not saying this will happen, but it could. One thing we've learnt about the web is that the future is hard to foresee.