Maybe the rapture happened after all.
No, the Parthenon didn’t crumble. Mount St. Helens didn’t erupt. And, to our knowledge, no one used a jetpack to fly to heaven once Jesus returned. But, recently news broke that social media juggernaut Facebook was actually losing membership in the U.S. and Canada. Are the end times upon us?
Well, let’s consider the whole story. According to Inside Facebook, Facebook lost almost 6 million users in the U.S. over the month of May. Out of 700 worldwide users, that accounts for less than a one percent drop. But, out of the 150 million users in the U.S., it accounts for a four percent drop. However, the number of users abroad is still on the rise (it added 11.8 million users worldwide in May), with Facebook planning to make a big splash in China before its IPO next year, when some have predicted it may be valued at over 100 billion dollars.
That’s a lot of numbers, and making any predictions about the future of the social network seems to us a bit premature. Instead of assuming we know what Facebook’s growth cycle will look like a year from now, let’s consider the standout company from the last tech bubble to hit the U.S. a decade ago – AOL.
By the mid-90s, AOL was sitting atop the tech bubble as the largest internet service provider in the U.S., boasting over 30 million subscribers. Despite the persistence of bugs and countless customers complaining about connection problems, “AOL” became practically synonymous with the Internet in the U.S., promising that as the online world grew, the service provider would be well-suited to follow. After all, the two were intrinsically intertwined and seemingly indivisible.
As the company approached its zenith, it was legitimized worldwide as a media powerhouse – not via an IPO, but rather through its strategic merger with multimedia conglomerate Time-Warner in 2001. As we know now, this was the beginning of the end. When the tech bubble burst, the newly minted AOL Time-Warner saw its revenue plummet, and less than a decade later, AOL was spun off by its parent company to its own independent IPO, where it flirts with the edge of obscurity.
Why did the tech bubble burst? Quite simply: The Internet evolved. Unable to keep up with the ever-changing online world, AOL and other companies like it couldn’t adapt. As the Internet became a worldwide necessity for both business and pleasure, AOL was quickly marginalized, and became, for lack of a better term, uncool. Competitors were quick to capitalize off of AOL’s failures, succeeding in areas AOL had yet to explore.
Fast forward to today and we can’t help but ask the same question: Is Facebook destined to meet the same fate as AOL, MySpace, and countless others who came before? Is a drop in active users in the U.S. a sign of things to come? Is Facebook’s IPO – once seen as a wise business decision – doomed to fail? Let’s consider a few things.
First, why is Facebook losing users in the U.S., its homebase? Some have suggested Facebook’s failure to rectify privacy issues may be causing a drop-off. Others have suggested that competitors like Twitter and LinkedIn are poised to dethrone the social media king. A few have even suggested that forward-thinking college students may be deleting their accounts to seem more appealing to potential employers. While these theories are likely somewhat to blame, there may be something else behind the reported decline.
Consider recent new hit film, and 2010 Oscar-winner, The Social Network. The historical biopic suggests Facebook had two unique selling propositions – areas where Facebook had potential competitors beat from conception:
1. When Facebook launched, its membership was exclusive. Original users needed a Harvard email address to sign up for accounts, and for years, a college email address was required when joining the site.
2. Facebook didn’t originally allows ads because, according to the film, “It wasn’t cool.”
Today, almost anyone can join Facebook, and advertising on the site is ubiquitous. With these things in consideration, it’s quite possible – even likely – that a drop in U.S. users is simply because Facebook isn’t “cool” anymore. Originally, many flocked to Facebook from MySpace because of its simple design, usability and lack of intrusive spam. Have you been on Facebook lately? Are Facebook’s advanced, ad-targeting techniques becoming eerily intrusive? Has user privacy been sacrificed to satisfy revenue model scenarios? Is user information more for sale now than it ever was on MySpace?
Most of today’s Facebook updates target advertisers and brands instead of individual users. Perhaps the company predicted its growth plateauing, or even dropping, as it drives toward becoming an online forum where everyone’s invited. If anyone could have predicted Facebook’s decline in domestic users, it would have been Facebook. Does the company’s idea of evolving with the Internet mean positioning itself as an interactive virtual marketplace where brands and individuals interact? As evidenced above, this would appear to make at least some sense.
Meanwhile, Facebook still maintains its elusive exclusivity factor in overseas markets where it has yet to be launched. With China boasting nearly a third of the world’s population and a rapidly growing economy, it’s possible that a slight drop in American users doesn’t concern the company as much as a successful launch in “The Middle Kingdom” by year’s end, which would boost the company’s eventual IPO substantially.
If that’s the case, prepare for Facebook to be labeled “MySpace for Brands.” After all, it’s advertising that pays the bills. If the Internet continues to evolve at such a rapid pace, it’s probable that Facebook has known about its own personal rapture for years and is positioning itself to avoid as much impact as possible once social media becomes something almost unrecognizable to the network that made it popular. The future of Facebook may appear grim for many of its users, but those seeking to profit off it remain as optimistic as ever.
For their sake, let’s hope they remember the valuable lessons learned from AOL and MySpace, and take them into consideration as we scream forward into a mysterious, murky future.