It is no news that Social Network Sites (SNSs) have taken the Internet by storm and none more so than Facebook. What may be news though is that, after enjoying almost cult-like adoption during its 8 years of existence, Facebook may be losing steam both in terms of new user registration and advertising revenue growth rates.
As of September 2012, and after being the largest technology stock market flotation ever, Facebook is being heavily criticized for its over-bloated IPO while its share price has been slashed in half compared to its initial offering in May of 2012. Of course, Facebook’s share price may recover. For the moment, what we can be certain of is that armies of analysts around the world are honing their excel skills trying to figure out where will the market ultimately take Facebook.
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In the world of the Internet what eventually determines the fate of any web site, including an insanely popular SNS, is usage. Facebook generates revenue through brand advertising, performance advertising, and the sale of virtual goods and subscriptions to the “firehose” (i.e., access to the full stream of public messages sent within a SNS). These revenue sources are closely tied to continuous active usage. In fact, it is only through continuous active usage – and not just sign-ups or simple occasional usage – that users keep joining the pages of paying companies, keep using third-party applications, keep buying virtual goods, and keep feeding the firehose. It’s clearly a case of catch 22 since continuous active is also the ultimate driver of “friend-generated content that lends SNSs consistent renewal and authenticity - the heart and soul of Facebook’s user value proposition.
So, usage is king.
This is naturally leading to one question that must be lingering into many people’s mind:
Is Facebook here to last, or is it just a particularly contagious fad?
--- to be continued next week ---