Facebook turns 10 but does it have a future?

Just like Apple, Facebook finds itself on the receiving end of criticism for failing to innovate. But the social network isn't afraid to gamble.

Facebook is 10 years old and along the way the social network and its ambitious founder Mark Zuckerberg have managed to score quite a few touchdowns.

It couldn’t have been easy but Zuckerberg had the gumption to turn down a billion dollar offer from Yahoo, handle a botched IPO and learn the ropes of Wall Street.

Facebook’s climb up the maturity curve may have been rocky but when your market capitalisation sits at over $US150 billion ($171.2 billion) and you have 1.2 billion members, you are probably doing something right.

But after proving his detractors wrong Zuckerberg and Facebook now face a new dilemma.

Facebook may have laid the foundation for social networking – its platform the bedrock of how we choose to share information – but its appeal is supposedly waning.

While a younger generation gravitates to a bevy of upstarts (Snapchat, WhatsApp etc) Facebook’s more rusted-on user base just doesn’t know what it wants from the network.

Like Apple Inc, Facebook finds itself on the receiving end of criticism for failing to innovate.

Just what this innovation will look like is anybody’s guess, but Facebook’s latest results suggest that it shouldn’t be taken lightly.

Whether the company had the know-how to make money from mobile advertising was a big talking point before Facebook’s IPO in 2012. The results are in and with more than $US1 billion of its $US2.6 billion quarterly revenues coming from mobile advertising it looks like Zuckerberg’s confidence wasn’t that misplaced after all.

But there’s a catch.

Dr David Holmes, Senior Lecturer Communications and Media at Monash University, warns Facebook’s rampant success could be a false positive.

While advertisers have realised that the modern ‘attention economy’ has migrated to mobile devices, it’s the usage patterns – not the migration to mobile – that are really important.

A study supervised by Dr Holmes last year highlighted that users are checking their Facebook feed but aren’t as engaged as we would imagine.

“Users are mainly just checking their Facebook feed, they might be doing it more frequently but are barely spending any time on it when they do,” Dr Holmes says.

“They are not lurking long enough to take in much at all, let alone ads.”

Taking aim at Flipboard

The official launch of Facebook’s Paper app – Zuckerberg’s shot across the bows of Flipboard – provides some insight on the company's aspirations to stay relevant.

Paper, the first product from Facebook Creative Labs, is designed to serve as an online newspaper for viewing and sharing articles and other content from a smartphone. It also provides customisation options to users, allowing them to marry their interests with their News Feed.

Paper is made up of stories and themed sections, tying together the News Feed with other themes and topics ranging from sports to food, with stories from publications. 

Interestingly, the Paper app is for the time being devoid of advertising. It’s big on design and most of all stresses streamlining and flexibility as key selling points for users.

RMIT University academic Patrick Kelly says the Paper app is Facebook’s latest shot at stickability, which seems to be the biggest problem for the social network. Lots of people are on it but very few are deeply engaged.

“I think if the app is successful it could demonstrate a trend towards consumers preferring to keep their social networking streamlined – sticking with Facebook, rather than branching out to smaller developers,” Kelly says.

But providing a platform for curated content could be a double-edged sword for Facebook. On one hand the app leverages off the strongest component of Facebook: the content consumed and generated by its legion of users. However, there’s always a risk that an offering like Paper, which puts a lot more choice in the hand of the user, could distract users and lure them away from the core Facebook mobile app – the one that’s seemingly making a mint at the moment.

It’s a calculated gamble – initiatives like Paper allow Facebook to showcase its internal development capabilities. Zuckerberg has the money to buy whatever he likes but that doesn’t mean that the future of Facebook has to hinge on the next big acquisition it makes.

It also shows that Facebook is prepared to dig deeper to deliver value to its user base and in turn ensure that there is no erosion of its user base.

Facebook’s future

Initiatives like Paper are crucial to Facebook’s long-term future because its critics, armed with studies and data, are climbing up the walls to proclaim the death of the social network.

There’s plenty of data to suggest that Facebook’s current model is inevitably going to falter.

University of Western Australia’s David Glance says that the idea of people wanting to share more and more is not panning out.

Professor Glance, a director at the university's Centre for Software Practice, says that Facebook’s core function as a communicator is becoming less of a value proposition.

“Breaking down what Facebook is used for, communicating directly with people – people are using a variety of means including SnapChat, WhatsApp, viber etc and the idea of Facebook is really just one mechanism amongst many,” Professor Glance says.

Ultimately, something else will come along and Facebook will be supplanted by a more appealing product.

To survive Facebook will have to morph into something different, something bigger, something that’s so embedded into our daily life that users won’t just log on to connect. That will depend on its ability to adapt to changes in the very nature of the internet.

RMIT’s Kelly expects Facebook will increasingly try to embrace convergence over the next decade, automating much of our activity on the network for us.

Facebook’s future lies in how effectively it’s able to integrate into our lives, how we consume content, how we distribute it and what we deem important. The social network is already making it easier for us to sign up for new websites and share content and Kelly says it’s a sign of things to come.

“We've recently seen Facebook adopt the use of hashtags, and I wouldn't be surprised if they adopt some of the key features of other applications like Snapchat and WhatsApp as well. In doing so, it makes it easier for consumers to stick with them, rather than deal with newer applications,” Kelly says.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles