Is Facebook a “Fad?”

Facebook’s brief 13% spike in share price on Friday morning after its public trading debut on NASDAQ instantly elevated the social network’s market capitalization to $117.7 – $13.7 billion more than the $104 billion valuation analysts gave it just the day before. 

While this type of spike is not uncommon during IPOs and is in line with the trading debut patterns of other companies, subtle  swings in share price now have massive implications for the financial health of a company that began as a side project in a dorm room.

In other words, Facebook is now a serious business and the company’s financial health as a publicly traded company impacts not only it’s stakeholders, but all of us who work in digital media. Concerns over whether Facebook can maintain and increase its revenue and lack of a definitive mobile strategy underscore the larger debate over the value of social media and whether companies can leverage enterprises like Facebook to make money.

Given that so much of Facebook’s financial future rests in its ability to convert its users’ personal data into cash money for companies, it’s worth recalling a public poll by CNBC and the Associated price that revealed half of its respondents considered Facebook to be a passing “fad”.

Are they right? Share your thoughts through the poll at the bottom of the post or in the comments below.

In the meantime, here’s brief summarizing some of the opinions on either side of the issue.

Yes, Facebook is a fad.

“A lot of social networks have come, peaked out and were replaced by another with better features, more usable UI/technology, etc.,” observes a user on the question and answer website Quora. In this view, Facebook is just like any other tech companies that will ultimately lose market share to the next big thing. Failure to adapt or innovate often results in waning user interest and one only has to recall the likes of Friendster and MySpace – whom were once considered the Goliaths to Zuckerburg’s David – to project what kind of future may eventually lay ahead for Team Facebook.

Last year, reports also suggested, albeit briefly, that Facebook was actually losing daily active users in the US. Couple this with what seems like ongoing user complaints about privacy settings, tweaks to Facebook’s UI and that general panning of its recent Timeline UI evolution, it’s possible to think that Facebook users would jump ship to a competitor that handled these things better.  Well, if Facebook doesn’t acquire them first.

On the business end, it’s difficult to view Facebook’s big day without also considering the status of other publicly-traded companies driven by social including GroupOn, LinkedIn, Yelp and Zynga – the shares of which were, at the time of writing, trading down.

No, Facebook is here to say.

With a reportedly growing base of 900 million active monthly users, the social network will soon touch the lives of 1 in 6 people around the globe.  With this level of global penetration, it’s a slim chance that a Facebook competitor will ever be able to effectively challenge the social network’s domination. Other networks will be successful, but they will focus on niche verticals, innovative content flows or differentiated user experience.

Sure, Facebook isn’t for everyone, and the company’s mishandling of privacy concerns has been reason enough for many to shutter their accounts, but active users are spending more time on Facebook, both on desktop and mobile, than ever before. Facebook also still has tremendous opportunities in emerging markets like India, which is projected to overtake the US as the largest consumer base by country in 2015, and China, where current government restrictions have limited penetration to only .04% of the population. All indicates that Facebook’s best days are still yet to come.

This “fad” question is a half-assed. 

“Facebook, the product, satisfies the human need to keep in touch. This behavior is not a fad, “ notes another Quora user. That being said, nothing lasts forever and Facebook will  surely cease to exist someday.  But to dismiss Facebook as a “fad”, then, overlooks its significance as a technology that has redefined how we, as humans, communicate with one another.  Facebook will eventually fade away, whether due to an organic loss of interest from users or an executive misjudgment of user privacy, but Facebook won’t die overnight and, like the the telegraph or the telephone  shouldn’t be considered so much of a fad so much as an innovation that will influence communication technology for generations to come.

“Facebook was not originally created to be a company,” wrote Zuckerberg to investors when it filed for its IPO back in February. “It was built to accomplish a social mission — to make the world more open and connected.” Eight years later, Facebook is anything but a temporary success, having proven it can accomplish this social mission, while being highly profitable as a private company.  But Friday’s IPO introduces a host of new challenges that make the company more vulnerable than ever to forces contrary to its original vision.  While Facebook’s fate may not happen in the short-term, its long-term destiny is now tied directly to a stock price that, when falling, can limit its ability to attract or acquire top engineering talent and better adapt the evolving needs of its users.

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Tags: Facebook, fad, IPO, Quora

This post is categorized in: Business, Social Media