At Fire Source Media we see a bright future for the social media giant. As Facebook continues to grow we believe there are some things to consider on a macro level that separate it from its competition. Consider this…
Skeptics of Facebook’s business model first pointed to their inability to ‘monetize mobile’, that was until they were able to monetize mobile. In fact, they have accomplished this to the tune of beating EPS estimates of .18 last quarter with a stunning .25 EPS. This was more than a 38% increase over estimates. The stock price dropped after this announcement mostly due in part to a NASDAQ decline of momentum stocks in the tech space. However, the company is marching forward despite what stock prices are communicating.
With the issue of mobile resolved critics now point to the evidence that young people (teens) are leaving Facebook. We often hear…
“Yeah, but people are leaving Facebook for Instagram. Especially young people.”
This is true, but not universal. Different parts of the world use social media differently.
Early vs Late Adopters
It is clear that Facebook is past the early adoption phase in America. Now, the highest growth rates exist in the 55+ age group demographic or the ‘late adopter’ phase. People ages 13-24 are choosing to use other social platforms such as SnapChat and Instagram. Growth rates are declining among high school and college students. (via iStrategy Labs)
But looking at the macro picture Facebook doesn’t seem to be too concerned. Why? The answer isn’t Instagram, it is international. The reason is because Mark Zuckerberg has a very large macro mission for the company that far exceeds the American market. As Americans (where Facebook was introduced) we are over the initial glam of the network, however overseas the platform is growing exponentially.
What is interesting is that since its acquisition very little has been done to the Instagram interface. Why haven’t they focused on this new platform that young people are moving to? Why not monetize it immediately to increase shareholder value? Why not expand past the mobile app? Well, one explanation would be to slow the migration away from the main Facebook, Inc platform… Facebook. In other words, the Instagram acquisition was to stop the bleed while retaining their initial database.
Long Term Strategy
It is obvious Zuckerberg is working on a long term strategy. He won’t be satisfied until the entire world is using Facebook. Although there are business factors tied to this it is more about a personal sense of mission, to bring internet accessibility and connection to the world.
Not only have they not begun to tap into Instagram advertising to monetize the platform, there is no clear set up for business and most importantly Instagram lacks this key feature: the viral share. Rather the platform is now used as an extension of Facebook photo sharing.
What gives Facebook its power is still the viral share. This can supersede the power of paid marketing and is really where the power of internet connection comes into spotlight. The fact that I can post something and it can impact a complete stranger, a friend of a friend. In order for Facebook to capitalize on this power it needs world wide connection. To become an internet within the internet. By doing so you create an online ecosystem that can not be duplicated. How is that possible? Simply, by creating a critical mass so large that migration to another single competing platform is possible but highly improbable.
Acquiring WhatsApp was similar genius. Remember when Facebook asked for your phone number? Rather than contesting for your phone number as Google is doing, they just went ahead and bought your phone number (if you use WhatsApp)… one of the world’s largest database of phone numbers.
Facebook is not going away anytime soon, in fact we believe they are just getting started. They will continue to change not only how we connect but how information is delivered to us. As social media is changing the way we connect and search for information the question is not how we search the web, but how the web searches us.