Here’s something I found that adds just a little more color to what I wrote on “Social Media” Below are a few bullet points from Facebook’s IPO statement that appeared in an article by Chris Crum on WebProNews. You can read the entire article here. These are just a few of the points, the article goes on to point out many more.
From the article:
- If we fail to retain existing users or add new users, or if our users decrease their level of engagement with Facebook, our revenue, financial results, and business may be significantly harmed;
- We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with facebook, could seriously harm our business;
- Growth in use of facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;
- Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control. ;
- We may not be successful in our efforts to grow and further monetize the facebook Platform;
- Our business is highly competitive, and competition presents an ongoing threat to the success of our business;
- Improper access or disclosure of our users’ information could harm our reputation and adversely affect our business;
© 2012 Mark St.Cyr
So you’ve bought into the whole “Social Media” phenom. You see over and over again on news channels, blogs, magazines, and anywhere else the exponential growth in users. Hundreds of millions of users signing on worldwide. You read and hear everywhere about people making so much money, people who are not only making money but seem to be getting filthy rich. That’s it you say, you’re all in. Scrap everything you know or thought you knew, change everything and put all your resources (aka money or budget) into social media venues and wait for the money to start rolling in. Is it rolling in yet? (Insert crickets here)
Facebook® just announced with much fanfare they are going public and selling shares. That’s great for Mr. Zuckerburg and the so-called 1000’s of new millionaires the news media is touting this IPO is going to create, but what about you and your business? The financial channels all say this will put Facebook’s valuation anywhere from $50 to $100 BILLION dollars. (Yes that is a B!) But exactly how are they going to be worth that dollar value unless your company, and other companies like yours can translate all those users to actual buyers of your goods and services. Remember it’s not Facebook’s job to do that. That’s for you to figure out. But that should be easy since there are so many users correct? It’s just the law of averages right? I’m here to say, wrong! If it was than every business next to a superhighway or downtown intersection would be profitable. Need I say look around your own city to prove my point?
The dirty little secret no one likes to talk about is this: Free to use for the user also means free to leave if something else comes along. If you think I’m wrong, just look to AOL®. Not too much difference in shape or scope for businesses when it was the player of the day. Where are all the businesses that scrapped everything and spent it all on the AOL model for conducting their business? Weren’t there 100’s of millions of users there also? Well there were, then AOL changed and tried to do the unthinkable with its users. It tried to place more advertising in front of their users to monetize itself. The exact thing the user base dislikes the most. How did that work out? (once again insert crickets here) Facebook and all the others are in this same position and once again the only selling point to monetize is the lure (or hope) that eyeballs aka foot traffic can be converted to dollars. Not too easy of a task if history is correct.
The only business I’m aware of that can base its business model solely on foot traffic with any real results is a street performer. And I contend their conversion rate is terrible. After that if you’re in any real business you need hard data about a plethora of details. And businesses like Facebook are not going to share that data with you. (Here’s more I wrote on that topic) And if they do their customers (users) won’t like it one bit. Not only won’t they like it but there are reports now surfacing from credible outlets those very users that you see (or were sold) as potential customers are deciding to leave for other less intrusive reasons.
A survey just released by the IT security company Sophos shows current users are apprehensive about coming changes to Facebook. So much so that over 50% of users expressed concern, and what was even more startling is over 32% of respondents don’t know why they are still on Facebook! (You can read the whole article here) As incredible as that sounds top it off with this study that just came out, Teens leaving Facebook for Twitter by an NBC affiliate. Why? Privacy concerns that Mom, Dad, Auntie, and everyone else is there. So if the kids who are most of the base go somewhere else, doesn’t the other part of the base follow? If that’s so, then it’s only a matter of time before tweeting goes bye bye birdy when the nest overfills there also. Sounds crazy and you might be saying “Oh that won’t happen.” I’ll just once again say, really? How’s My Space doing? I know My Who? Exactly my point.
I’m not saying that social media is going away or can’t be profitable. What I am saying is there are road signs everywhere that are flashing caution. Or as I read once “Proceed Slowly..Wash Out Conditions Apply.”
© 2012 Mark St.Cyr