Traffick - The Business of Search Engines & Web Portals
Blog Categories (aka Tags) Archive of Traffick Articles Our Internet Marketing Consulting Services Contact the Traffickers Traffick RSS Feed

Did Facebook Win in a Lame Category?

Posted June 19th, 2010 by Andrew Goodman

Reports of Facebook’s surprising revenues have added momentum to the prevailing viewpoint that the popular social networking platform is a looming financial juggernaut, possibly on a par with Google.

On further reflection, though, the two companies couldn’t be more different. Google burst on the scene because it solved a really hard problem — web search — and kept solving it. The company continued to innovate on a variety of fronts. Once it gained a critical mass of engineering talent, it became a magnet for even more talent — both mature and shiny new. Today, the company innovates not only in straightforward product categories like email, but it’s a leader in video, mobile, browsing, and yes, operating systems.

Facebook’s developers may be smart, but they’re not working on even a tiny proportion of the hard problems Google faces down. In that regard, Facebook reminds you of a company like Yahoo (but admirably, less diversified). Few barriers to entry, nothing really proprietary. It’s just the place people go. Yahoo — in yet another lame tagline that seems to be popping up of late — states that you should consider it “your home for everything.” Facebook wants you to think that, too. But why? Why should you? Yahoo fought a losing battle over the years against the “why should I?” erosion of its user base. To maintain loyalty and eyeballs, it was forced to acquire companies like Geocities, eGroups, and dozens of others. That diluted its share price, and confused users.

Turning to the financials, Facebook appears to be really rolling. Still, if you project a couple more years of 100% growth in revenues, that only gets the company to $3.2 billion, and projecting a more modest growth rate from there, it’s close to a decade before they get to the $21 billion level where everyone was suddenly saying “WOW. Google is REALLY a force to be reckoned with.” Where do you think we’ll all be in a decade? Where will Google be?

Other recent talk has noted that Facebook ascended because management at MySpace and Friendster bungled badly. There’s little question about that, but it’s also worth pondering whether most of the companies in this space are just in a doomed category that eventually burns through user goodwill and attention spans. ┬áNing, Bebo, and orkut have also had incredible promise that seems to have fizzled. Company after company in the social networking vertical have hit a wall where users get bored, momentum fades, and usage drops.

The jury really is still out, in my mind. Facebook is champion in its category. But is it really building a platform, and defensible assets? Or just a familiar sort of environment, and a brand?

In other words, is Facebook more like AOL or Yahoo than Google?

Being compared with other billion-dollar companies is not such a terrible thing, of course, for any young upstart founded in a college dorm room. Being number one in any lucrative category isn’t such a terrible thing. But down the road, ┬ámaybe the failures of Friendster, Bebo, and MySpace mean more than just that they lost to the opportunistic, well-managed leader: it could mean that users will eventually have trouble figuring out what your “category” is or means, and what you actually do… as happened in the long declines of AOL and Yahoo.

For these reasons, I think it’s worth asking whether there is something inherent in Facebook that limits its potential… and makes it night-and-day different from a serious engineering-driven company like Google.



One Response to “Did Facebook Win in a Lame Category?”

  1. Ed Kohler says:

    I think Facebook has the potential to become bigger than AOL or Yahoo due to its ability to generate a utility. Being the universal login to the web would make life more convenient for web users, while allowing Facebook to collect a ton of usage data for their ad platform.


 


Traffick - The Business of Search Engines & Web Portals

 


Home | Categories | Archive | About Us | Internet Marketing Consulting | Contact Us
© 1999 - 2013, Traffick.com. All Rights Reserved