Right now, Facebook is a critically important platform for interacting with small business customers. You should definitely have one and you should be using it. Any way you can reach an increasingly tech-savvy set of users is a good thing, in this BizEngine blogger’s book.
Notice that I said right now, though. Last week we talked about the Facebook IPO and why business hype is rarely a good thing. Today I’d like to tackle the latest trend in Facebook bashing: Predicting the company’s sudden and unfortunate demise. It’s like playing a pre-emptive game of Clue, guessing that it will be Mark Zuckerberg in the CEO office with the lack of advertising revenue. Most of these articles, it should be said, are laughable.
One did catch my eye, though, and that’s what I want to discuss today. The Technology Review published by MIT is always full of smart perspectives, and Michael Wolff makes a powerful argument in his latest article that Facebook is doomed—not today, not tomorrow, but “the end is nigh.”
This argument is based heavily on what Wolff calls the inevitable slide in online advertising value, something he said larger companies are already seeing. The ability to target ads on the Web makes them more efficient, he notes, but people are increasingly ignoring advertising. He looks at Facebook’s $100 billion value, its gigantic user base and its middling ad conversion rate not with admiration but with alarm. Facebook, he notes, would need “alchemy” of the highest order in order to turn that into sustained success:
Oh, yes … In its Herculean efforts to maintain its overall growth, Facebook will continue to lower its per-user revenues, which, given its vast inventory, will force the rest of the ad-driven Web to lower its costs. The low-level panic the owners of every mass-traffic website feel about the ever-downward movement of the cost of a thousand ad impressions (or CPM) is turning to dread, as some big sites observed as much as a 25 percent decrease in the last quarter, following Facebook’s own attempt to book more revenue.
You see where this is going. As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium can no longer be overlooked. The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else.
What does this mean for your small business? At the moment, not much. Facebook remains an effective way to interact with your customers. But if Wolff is right and the crash comes, it will obviously change the game for everyone. It’s just something to keep in the back of your mind.
What do you think of Facebook’s future?
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