Social media's biggest behemoth has had it pretty rough the last few weeks. Lawsuits are pending against Mark Zuckerberg et al. over the botched IPO, alleging inappropriate sharing of information (who'd have thunk it?) and stock is down 32% since that launch. Study after study has emerged, both before and after the IPO, to confirm that the current Facebook ad regime is not resulting in significant consumer spending or ad clicks.
Then this week, reports of mysterious outages were followed by 5% shareholder Sean Parker announcing that he was "bored" with Facebook at the launch of his own new product Airtime.
All this bad news has led the chattering class to begin speculating: how firm is Facebook's foothold at the top of the social mountain?
"In five to eight years," claimed venture capitalist Eric Jackson on the CNBC program Squawk on the Street, "they are going to disappear in the way that Yahoo has disappeared. Yahoo is still making money, it’s still profitable, still has 13,000 employees working for it, but it’s 10 percent of the value that it was at the height of 2000. For all intents and purposes, it’s disappeared."
In other words, this apocalyptic prediction is heralding not bankruptcy, but (perhaps even worse, in the social media age) irrelevance. To say that a company with 13,000 people has "disappeared" reveals a very different perspective from that which the layperson would take. Reminds me of political debates where someone says a billion dollars isn't a lot of money; I guess it's all relative.
To understand the public's reaction to all this, you must factor in a certain amount of schadenfreude. Facebook is the world's largest clique, after all: a giant pep rally of almost a billion people. Even those who spend hours a day staring at the site are sometimes nursing a resentment kept barely below the surface. (One paradoxical phenomenon you're sure to have noticed by now: the Facebook-bashing Facebook status update. Oh, the irony.)
There's been an element of volatility to social media that goes even beyond the usual creative destruction or paradigm shifts that turned Yahoo! from a superstar to a bit player. There was a mass exodus from Friendster to Myspace (recently sold for $35 million after a peak value estimate of $12 billion) to Facebook. These companies were not just Web companies. They also resembled other social phenomena like nightclubs or fashions, which have a natural lifecycle of buzz, overexposure, and mass avoidance. As Yogi Berra (allegedly) said, "Nobody goes there anymore. It's too crowded."
It remains to be seen if an actual peak has been reached. The really alarming number for Facebook would be any sustained decline in real membership, and that has yet to happen, despite the fact that everybody's mom has crashed what used to be a raging dorm-room party.
In any case, for now, Facebook is still where the action is. It may be true that it has failed to deliver as a platform for paid advertisers, but it remains the indispensable social network. As long as that's the case, it will also be an important venue for local and small businesses, e-commerce, and even large companies like GM, if not to advertise, then at least to engage in. For now.
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