Facebook floats, but has social networking passed its peak?

Mon, Jan 30, 2012, 00:00

THE SPOTLIGHT is rarely off Facebook, but reports that the social-networking company is planning an initial public offering (IPO) in May have started a serious conversation about how much Facebook is worth and how much it can raise with its stock market flotation.

But there’s a bigger story happening in social-network land. Facebook’s IPO comes quite late in the day. With unprecedented growth to 800 million users in eight years, Facebook has tough questions to answer about where it goes from here. The site has become so embedded in so many people’s lives that the excitement surrounding it is ebbing.

Social networks, once the web upstarts, are now the norm. The buzz previously reserved for social networking has moved to mobile, tablet devices, trying to make geo-location networks take off and trend-watching the game layer. So how do you push an industry forward when everyone is so used to it? Last Wednesday Facebook announced changes that would bring new apps to a user’s timeline, including Ticketmaster, film website Rotten Tomatoes and TripAdvisor. It’s changes like this that Facebook hopes will keep a grip on its users. Why leave your page when you can access even more information on it?

Damien Mulley of Mulley Communications says Facebook is “at 80 to 85 per cent saturation of internet users in most countries they’re in, so that last 15 per cent is going to be very hard and very expensive to reach”.

Facebook has become the norm, making more dramatic expansion hard, says Mulley. “If I go into a business now and say ‘you should be on Facebook’ they turn around to me and say ‘duh’. It’s standard now. That said, less hype could be good for stability. Their issue now, with the users that they have, is how to squeeze more value out of those users. Right now, it’s just advertising. They’ve played around with check-ins and location-based stuff. They tried their own version of Groupon last year, Facebook Deals, and they’ve kind of cancelled that now. The big worry is that they’ve grown so quickly.”

Programmer and internet activist Aaron Swartz, who founded online lobbying group Demand Progress and was an early employee and co-owner of social news website Reddit, says conversations about the downside of Facebook are on the up. “Most people lead busy lives and don’t have time to be affected by most things in their lives or think about them, but there’s an increasing amount of attention to issues surrounding Facebook.”

Swartz talks about “nymwars”, the debate stemming from policies of social networks that instruct those signing up to services to use their real names, raising issues of privacy and identity. “Suddenly most people who didn’t get involved in these discussions did, and it was a big deal,” Swartz says. “Right now on the internet, you have an independent relationship with these sites, and on the Facebook model, they’ve become the platform that underlines all of this [information], so you can only have one Facebook account to use all these applications, so it kind of becomes like the Apple store, and if any application is inappropriate it gets shut down. There’s a huge amount of money to be made, but there are dangers as well in terms of how free that information is.”

The fragmentation of social networking has begun. Mulley mentions Path, a photo-sharing network not dissimilar to Instagram, as a growing area. “The other crowds [social networks], described themselves as a ‘Facebook for this, a Facebook for that’ offering the same suite of services,” Mulley says, “whereas Path, Instagram and so on are about taking photos and sharing with a small amount of people. It will just fragment like that. Facebook is an entire industry and when people come in they can disrupt the industry. The ‘we’re not Facebook’ is probably going to be the big thing, and Facebook will probably just buy them . . . I think the cool kids are going on to other places. That ‘first mover’ kind of stuff was Facebook for a while, but now it’s just like everything else.”

While Facebook’s IPO is a big deal, lessons have been learned from the less than epic IPOs of firms such as Zynga and Groupon. As Swartz puts it: “There will be this crazy excitement about Facebook finally IPOing, then the reality will finally set in and people will start looking at the numbers.”