Lots of people are have been speculating, monetarily and verbally, on the value of Facebook. One bullish analysis has particularly stuck with me, I think it captures the essential failure to understand what a dangerous proposition Facebook is. To paraphrase, the thinking was something like this:

Lots of people have made their fortunes by devising new TV formats, or writing sitcoms, but Mark Zuckerberg has gone one further by inventing a whole new medium. Facebook is the new TV, and it’s controlled by one company.

If this were true it would certainly make Facebook very valuable. But it misses one point: Facebook does not create content, it’s a place for users to share content. This is a recipe for explosive growth, because of Metcalfes law: that the value of a social network is proportionate to the number of people on it. It’s positive feedback, the more people sign up the more interesting the site is, which leads to more people signing up.

But this exact same logic means Facebook can implode extremely quickly. If a few people decide they aren’t so keen on FB anymore and stop using it, then it’s a bit less valuable as an experience, so a few more people will stop using it, and the same positive feedback leads to a exponential drop in participation.

A lot of people think that Facebook is safe from this type of implosion because people don’t have the time or headspace to sign up to another to another social network, learn it and rebuild their friend list. However, as people spend more time online they become more savvy, more likely to demand specific features that FB doesn’t offer. Perhaps their focus will move to a network that is specific to their hobby or social group. Not only is rebuilding my friendship list easier than you might expect (import from Hotmail etc.), it’s also highly desirable. Lots of people want to spring clean their friend list or start with a clean sheet. Perhaps to rid themselves of the nagging feeling they don’t really understand the privacy settings and might be doing something stupid.

There is already plenty of anecdotal evidence of Facebook fatigue. Notwithstanding it’s admission of a lot of fake Facebook accounts, Facebook certainly still seems to be growing, but it’s not as easy to tell how it is fairing as you might think.

When Facebook give their user count in Active Monthly Uses they include anyone who uses a Facebook comment box on a third party site, likes any content anywhere or authenticates using Facebook. If you have a Facebook account, it would be quite hard to use the Internet without counting as an active monthly user. None the less, you might be almost completely disengaged with the site. If Facebook was seeing declining engagement wouldn’t show up in their overall user stat.

Whether this has started happening yet or not, or ever will, obviously I don’t know. But Facebook isn’t a company like others. Oil companies might risk having a Deep Water Horizon style disaster, but they can be sure everyone won’t simply stop using oil because it goes out of fashion. A TV company can be relatively sure that it’s audience won’t simply implode. But Facebook is a social convention, it’s more like a popular pub. The crowd can just move on.

At the moment, Facebook has a lot of to daily active users, so it hasn’t reached crunch point yet. However, I presume that anyone who signs up to Facebook is going to be a relatively active user immediately after signing up. Why else would they sign up to the service. Everyone seems to accept that their is a limit to how many new users the site can add, and when the novelty effect is no longer in action Facebook’s stats might start to look significantly less appealing.

 

 

 

 

 

 

 

 

 

 

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