This article is an opinion piece addressing the issue of whether Facebook has longevity in its current level of success. The author predicts that Facebook will “disappear” in four years. In this context, the word “disappear” does not mean bankruptcy or that people will stop using it entirely, rather it means Facebook will lose value and relevance, like Yahoo, for example. When the author first introduces Yahoo, there is an interesting comparison between Facebook and Yahoo (post Tumblr acquisition). The two companies are very similar in terms of number of users (1 billion for Facebook and 1.1 billion for Yahoo) and revenues ($5.5 billion for Facebook and $5 billion for Yahoo). However, the market cap for Facebook is much higher than Yahoo, $55 billion versus $10 billion, signaling Facebook’s clear superiority in terms of consumer’s perceived value of the company. Is Facebook headed for the same fate as Yahoo? The author would argue yes and supports his opinion with the following points as stated in the article:
- Your Internet generation matters.
- Brand and money helps past winners stay in the game.
- Being big lets you make lots of money but isn’t very cool.
- Death by a thousand snapchats.
- Can Facebook buy its way back to cool?
- “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”
- What if social networks are inherently unstable?
- 4 years is a long time.
The author makes some very interesting points regarding potential issues facing Facebook’s ability to maintain its current value. I like the interview clips from David Karp of Tumblr pointing out the volatility of social networks that comes from connecting so many people. When people leave the network, others follow. Karp thinks that content-based sites like Yahoo and Tumblr have more security because people come back regardless of what their friends do because they like the content. I think it’s worth pointing out that Karp might be a bit biased given Tumblr is his company as well as the recent buy out from Yahoo. I agree with many of the points that the author makes about Facebook. However, I’m not sure Facebook should be compared to Yahoo because the numbers used in the beginning of the article are very much inflated by the Tumblr acquisition. I can’t recall ever being as popular as Facebook. That doesn’t mean I don’t think Facebook could decline in value if its management doesn’t progress the brand in the right ways. However, I’m not sure Facebook could “disappear” in the same way that Yahoo did. My opinion is that Facebook will have to be very strategic in the upcoming years, building mobile and considering other acquisitions like Instagram.
Questions for the class:
Is Facebook headed in the same direction as Yahoo? In other words, will it “disappear” in four years?
What should Facebook do to retain its value and remain relevant? Is acquisition a good strategy?