5 trends that could take down Facebook

A couple of weeks ago, the folks at iMedia Connection reached out to me with a provocative question – could I write an article on the 5 startups that could take down Facebook?  I couldn’t resist the prompt so I proceeded to reach out to some of the folks I respect the most in the digital media space including entrepreneurs, investors and brand marketers.  What I uncovered along the way is that Facebook’s biggest threat wont come from a single startups, but likely several emerging trends that could pose a threat.  I’ve reposted the article below or you can read the original over at iMedia Connection.

5 trends that could take down Facebook

It’s hard to argue Facebook’s momentum. We are talking about a company that has over 500 million active users, was valued by Goldman Sachs at $50 billion in January 2011 (and $75 billion by secondary markets in March 2011), and is so popular that Hollywood made an Oscar-winning movie about its beginnings. You are also talking about a platform where every month, more than 250 million people engage on external websites, with 80 of comScore’s U.S. Top 100 websites having integrated with Facebook.

Given this momentum, it’s tough to envision a future where Facebook is not one of the dominant players in the digital landscape. But at the same time, history is littered with the stories of digital goliaths who stumbled from their pedestal (think Netscape, AOL, Myspace, etc.) Could this same fate be in store for Facebook?

That is the very question I posed to a group of entrepreneurs, digital marketers, and venture capitalists. Could they see a future where Facebook’s dominance has been challenged by a new breed of start-ups? And if so, what start-ups today could one day “take down” Facebook?

From those discussions, it appears there isn’t a single “Facebook killer” that will sink the social networking giant. Instead, Facebook is faced with the emergence of several themes (and multiple start-ups) that could one day prove a threat to their business.

Here are five emerging themes that Facebook should be afraid of.

Creation of vertical, interest based networks
The very thing that led to Facebook’s growth (a standardized and unified experience) could also prove to be a kink in its armor. Gautam Gupta from General Catalyst Partners pointed out to me that “Facebook’s market share of time spent on web is driven by the utility it provides to consumers as a social network.” This broad social network will continue to have its place, but people are increasingly being drawn to vertical and interest based networks to meet specific needs.

A prime example can be seen in the business world where you have LinkedIn going public with over 100 million members, Quora gaining tremendous traction through its appeal to the start-up ecosystem and ResearchGate connecting 900,000 scientists in more than 192 countries. You could argue that any of these communities could be built on Facebook, but their success proves the appeal of a concentrated, interest based network. The appeal of niche networks extends beyond just business. For instance, GirlsGuideTo bills itself as the “ladies only” guide to 20-something lives on everything within the good, bad, ugly, and taboo.

Notions of trust and privacy
The issues Facebook has faced with privacy have been well documented, ranging from the launch of Beacon to debates around privacy settings on the site. This has continued with their latest product launches, as some have remarked that a major barrier to Facebook Places is the fact it broadcasts to an extended Facebook social network versus the more curated personal networks of a service like Foursquare.
This notion of trust and privacy is going to continue to grow as a theme that consumers are deeply concerned about in the coming years. For instance, Diaspora is a new, open-sourced social network that was created specifically as a response to the privacy “hiccups” of Facebook. Its mission is pretty succinctly stated through Diaspora’s tagline of “Share what you want, with whom you want.” Path builds upon this by creating what it calls a “personal social network” composed of only your closest friends and family. This “personal social network” is reinforced by limiting a person to only 50 connections on the site. In a more practical application, Ziplist creates a private way for me to easily share my grocery shopping list with other household members. After all, the entire world doesn’t need to see when we need to pick up toilet paper.

Discovery of people, places, and information
Some of the most interesting start-ups today focus on helping people with “discovery” of new people, places and information. For instance, Color provides “elastic social networks” based on where you take photos, what’s in them and what’s around you when you do. StumbleUpon and Tumblr provide a similar sense of discovery on the web. At the core of this discovery ability is the “permission premise” that was called out by Nick Seguin, a partner at Dynamit and Manager of Entrepreneurship at the Kauffman Foundation. As Seguin pointed out to me: “The majority of people utilize the Facebook platform to keep up with acquaintances versus consuming important information. Twitter and Tumblr allow this discovery of information without having to worry about a relationship (or a perceived one.) It’s important for individuals to curate the information I consume in those environments. The friend dynamic is great, but also restrictive for Facebook in this regard.”

Joe Medved from Softbank points to mobile as another particular area of “discovery” that could prove a hurdle for Facebook. According to Joe, “Social networking services focused on discovering others, where you can build a somewhat virtual persona, or better yet an embellished version of your real persona, have potential. Ninety percent of social networking users in Japan don’t use their real name, which is why there are 3 social networks, 4 if you count Twitter, with around 20 million users, as opposed to one dominant player like Facebook. The vast majority of social networking activity in Japan is on mobile phones. As smartphone penetration goes more mainstream in the US, mobile centric social networking services leveraging smartphone capabilities have the potential to take share from Facebook.”

Need to motivate human contact
With the rise of digital over the past decade, the definition of “friends” has certainly changed. While Facebook was started with the intent of being only focused on real relationships, the site has evolved to the point where your social network is much broader. At the same time, you could argue it is really not enough to have an online only relationship or even one that is primarily digital (i.e., the folks from high school you haven’t seen in over a decade but are “friends” on Facebook.) This has left the door open for companies who motivate in person interaction. One such company that capitalizes on this inherent Facebook weakness is Meetup, whose mission is to “to revitalize local community and help people around the world self-organize.” It is a mission that is definitely working, with over 250,000 monthly Meetups in over 46,000 cities worldwide.

While Meetup was one of the first to recognize that digital could actually be an enabler of human contact, many more have followed suit. For instance, Skillshare allows you to “learn anything from anyone” by connecting with folks in your community who have a skill to share. GrubWithUs tackles the problem of meeting new people in the years after college by “building friendships over food.” Wednesdays takes a similar approach of meeting over food, but is instead focused on coordinating lunches within an organization. All of these companies are capitalizing on the basic need for human interaction, but using digital in new and unique ways to do so.

Consolidation, curation, and control of entertainment
On the backs of social gaming companies like Zygna, Playdom, and Playfish, Facebook has emerged as a major player in the world of gaming, helping invent a new category along the way. But outside of “social games,” Facebook has been slow to capitalize on entertainment as an overall vertical. This was one major reason that Myspace briefly attempted to rebrand as a “social entertainment” site focused on sharing and finding music, television, games, and movies. And in a more successful example, this is why services like Pandora, YouTube, and Hulu have been able to flourish in their respective spaces.

Given the size of the entertainment vertical and its importance to consumers, it is somewhat surprising that Facebook is still largely ignoring the space. This opens the door for additional companies to move into the consolidation, curation, and control of entertainment. For instance, Rovio was able to create its Angry Birds franchise without overreliance on the social graph of Facebook, instead focusing on iOS and Android. This move towards mobile also opens up new opportunities to monetize entertainment leveraging platforms like TapMe. Outside of gaming, you have other start-ups combining elements of social networking with entertainment. As an example, Spotify has 10 million subscribers — one million of which are paying subscribers — in Europe that have created 200 million playlists. Spotify specifically calls out “social music” as a feature that makes it easy to share everything you listen to on Spotify with your friends including tracks and playlist.

Conclusion: Facebook is the suburbs
There is no question Facebook will continue to dominate the digital landscape in the coming years. But there is a very real chance that alternatives will emerge reflecting the evolving needs of our population. As Phin Barnes from First Round Capital stated when I asked his opinion: “One argument is that Facebook is the suburbs and we need to see networks that more closely resemble the diversity of dense urban living and the trust/community of small rural towns.” In this regard, Facebook’s biggest threat might just be the needs and wants of the same constantly evolving community that built it in the first place.

Comments

  1. ari_ratner says

    Dave – great post. Hope you're doing well and are as excited as I am to see who the next Director of the Brandcenter will be. Big task but helping to continue to push the school forward is an awesome opportunity. Selfishly, I hope it's someone with more of a Brand Management or entrepreneurial background.

    Anyway, back to the post. An interesting topic for sure, but I think you missed a couple of key points. A lof of the "competing" sites you mentioned haven't replaced Facebook accounts and while Color and Quora have certainly picked up buzz in the start-up space, do they continue to gain traction or have they plateaued? I read something the other day that Quora has lost a lot of its momentum; but I am not certain if that's true, so please forgive my ignorance. So while these vertical networks can and will eat into activity on Facebook, I don't think they will replace Facebook profiles and certainly do not have the growth ability as a more general network does.

    While massive, Facebook's best move was building the Facebook Connect tool, allowing for users to interact with the network and their "friends" on the many websites they visit daily. This is the main reason I do not see Facebook losing it's dominance anytime soon.

    Anyway, just my two cents. Again, hope you are well.

  2. Tom_Cunniff says

    Dave, good post. I'm also a bit of a contrarian on Facebook. I've been around digital long enough to see AOL go from total dominance — starring in a movie with Tom Hanks and Meg Ryan — to also-ran in a few short years. What the digerati sometimes forget is that low barriers to entry often mean low barriers to exit for customers.

    I see some different threats to Facebook than the ones you have identified. I wrote a faux sequel to "The Social Network" about it here: http://tinyurl.com/revenge-winklevosses

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