Thursday, September 5, 2013

What does Facebook's Decline Mean for the Industry?

A lot has been written lately about the Facebook "exodus". Teenagers are not on Facebook, and as 13 year old Ruby Karp mentioned, "All of our parents and parents' friends have Facebooks." And teens do not want to socialise where their parents are. Beyond losing its cool factor with teens, many of Facebook's current users are leaving. This spring, Facebook lost 6 million US visitors in one month and experienced a 4.5% drop in log-ins in the UK. It is clear that the Facebook era has peaked. What does this mean for the industry?

We are have already seen a series of acquisitions by big players and this trend is definitely going to continue. Yahoo acquired Tumblr, Facebook acquired Instagram, and Amazon and Google will likely make audience-driven acquisitions in the near future. Given the success of Twitter's Vine (which lets users upload and share 6 second videos), the tech industry's key players might be tempted to spin off new platforms of their own. With Twitter, this was a brilliant extension of the platform's uniqueness: brevity (Twitter lets users communicate in 140 characters or less.)

It would be much harder for Google, Facebook, or Microsoft to spin off new platforms because their offerings are so much more complex and multifaceted. Take the example of Google+, unsuccessful attempt by a big tech company to create a social networking platform.  It's hard to articulate the value proposition of Google+. Even with a massive amount of registered users, there's no reason to come back to the platform on a regular basis. Google should have just continued to integrate social features into Gmail (adding Hangouts as a new feature, the way it did with Google Chat and Google Voice), which users already log onto multiple times each day.

Apple and Amazon both stand a greater chance of creating successful own platforms. As the two companies centre around content, they could easily build out networks of niche enthusiasts around books, movies, and music. But community building is quite different from platform building, which is probably why Amazon and Apple have both focused on improving their computer-generated recommendations.

As the big players struggle to stay relevant and compete with one another, we will see a proliferation of smaller platforms pop up, much like we did in 2007-08. I'm excited to check out the next wave of niche networks that focus on a single feature or topic. Many of these will get acquired quickly. But we might just see the next Twitter emerge- a formidable competitor in its own right.

1 comment:

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