Five Critical Moves Facebook Needs to Make

Online, November 9, 2010 (Newswire.com) - Facebook has more than 500 million active users worldwide -- half of whom log on every single day --and collectively spend 700 billion minutes per month on the site. Of these, there are more than 200 million active users currently accessing Facebook through mobile devices and these particular users are typically twice as active as their computer-linked colleagues. And finally, on the revenue side of the equation, Reuters has reported that Facebook may have generated nearly $800 million in revenue last year while still other reports show that the social networking juggernaut is currently one of the world's leaders in delivering display ad impressions.

So what's not to like? With an implied market value north of $25 billion, this should be one gigantic smiley face. Unfortunately, five compelling reasons suggest that Facebook may not look quite as pretty over the next few years.
First, the world of online display ads and their perceived effectiveness is under siege. According to DoubleClick, a subsidiary of Google, the click-through rate for static online ads is now approximately .10% and dropping. Translation: only one person in every thousand bothers to click on a display ad and only a small subset of those ever makes a purchase. As one online expert, Shawn Noratel, founder of Liquified Creative, noted, "Online advertisers are increasingly wary of throwing precious ad dollars into an ever-expanding online universe. To grab eyeballs, it takes something very special - every time."

Second, big is boring. As Facebook becomes a global presence with a "population" only topped by two countries -- China and India -- innovation may collapse under its own weight to the rigors of convention. The hip factor is long gone at age six, and with the shrinking lifecycle of online companies, many suggest that this one is already a bit long in the tooth. Sound crazy? Think AOL. At its peak, it had 30 million customers who actually paid something each month to be considered members and few thought that it could stumble.

Third, content is king. The number one Internet site remains Google and for a very good reason. People use it to find information. Facebook, on the other hand, is all about finding people. And many of these people, once found, just don't have very interesting content to share. Witness a 58 year-old relative posting that he likes coffee and a 48 year-old friend searching for someone to take care of her imaginary herd on Farmville. That's not content. What these people and others are doing is called self-expression. Nice, but not enough to keep the masses coming back day in and day out - and buying things in the process. As Noratel explained, "Consumers ultimately want some form of news. It can be personal, it can be brief but it must be relevant and substantive to the member."

Fourth, privacy is a worry. The simple act of establishing a Facebook account is really a direct or implied contract with the provider in which the "member" agrees to share certain personal information in exchange for a free service. Once given up, privacy is hard to recapture. We've already seen the dustup recently as Facebook members voiced concerns over the potential for advertisers to abuse the system and bombard members with a targeted array of ads a la the futuristic scenario depicted in Stephen Spielberg's movie, Minority Report.

Fifth, consumers like choice but prefer consolidation in content. Ted Leonsis, a serial entrepreneur and majority owner of the Washington Capitals and Wizards affectionately refers to this mix of multiple media forms as a "mash up." Perhaps that's why cable companies have been so successful in selling multiple products to the same household. However, in 2010, consumers have plenty of cool, free options to connect. There is LinkedIn for business; YouTube for video; MySpace for music and film; Twitter for time-sensitive, text-like chatter; Skype for free video conferencing; Chimp Mail for bulk email delivery; Survey Monkey for online research; and, countless email providers for daily correspondence. All told, with so many free, social networking options at our disposal, the consumer may simply be approaching the tipping point in terms of information overload.

So, is Facebook completely done? Not by a long shot. But, it does need an overhaul. Noratel and other suggest that as the mobile world boosts bandwidth, Facebook's most active members may become even more active. Who's going to service them? Are the current "big two" in mobile long distance adequate? Many experts believe that the process of seamlessly linking multiple applications on a single, social network will become essential. Video, business connectivity, music, film, burst messages and much more should all be fundamental components of the Facebook experience -- or another provider will undoubtedly fill the breach. The stakes are high and Facebook's top team will need to dig deep, quickly, to keep a bright smile on the company's legacy and market valuation.

Contact: John B. Dinsmore
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