Wednesday, 14 November 2007

The End of Facebook?

Anyone that has studied for a business related qualification of any sort should be familiar with the product lifecycle.

I believe that the product lifecycle for Facebook is teetering on the stage of decline. Sales volume in this example can be treated as time spent using the site, a metric increasingly used by analysts to measure engagement.

The development stage happened back in a university computer room where Mr Zucherberg first began his social experment. Cleverly engaging technology savvy students and societies during the introduction stage was perhaps the most crucial for the site. Since Febuary 2006, when Facebook became available to anyone with an email address, the site seen significant growth. Now, I believe that this growth is showing signs of slowing down. There are three main reasons why.

1. Running out of New Friends
The excitement surrounding collecting friends plateaus relatively quickly. Even people that have over 1,000 friends (really?!) cannot sustain this growth. Part of the excitement is connecting with people beyond your standard communication set. This happens over a common platform with limited risk on either side. As the excitement of discovering old friends dwindles, so will popularity.

2. Widget Overload
The multitude of different widgets serves more to annoy and frustrate users rather than add any value. I have been bitten by Vampires, had sheep thrown at me and unlimited unwanted items posted on my Funwall (which I do not have). Am I really enjoying this?

3. Workplace Restrictions
Facebook is also tainted by it's popularity and addictive nature. A large percentage of businesses now prohibit their staff from using Facebook at work. The ability to communicate from a disparate collection of venues is one of the greatest advantages of Facebook. Once this is taken away, the communication channel is severed. Employees must resort to text messages, email or even (gasp) telecomunication in order to communicate with friends in the workplace.

MSN Messnger gained massive traction in the early 00's. A free and easy way for people to communicate from one computer to another. It is still used today but not to such as great an extent. Ebay have now admitted that they overpaid for the Skype and I think the £112M that ITV paid for Friends Reunited is simply ridiclous, but this is the subject of another post.

The fact is that product lifecycles can develop at a faster rate online. All of these products were popular when they first launched and, true to the product life cycle, went through extreme growth periods. Before reaching maturity and decline stages, some more severe than others. Because decline and extinction can happen just as quickly.

How can successful online businesses avoid this? Ansoff famously identified four possibilities for a business seeking to take a new direction.

The greatest challenge Facebook has is to either sustain and monetise the existing user base, or cashing in quick by selling stakes to high bidders and moving on to the next great idea, something Google has done with astounding success.

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