Facebook Hype Will Fade
10 Jan 2011A great piece by Douglas Rushkoff, who correctly unveiled the reality behind the AOL - Time Warner merger not too long ago with his: Signs of the Times piece, and now is posting a similar opinion on Facebook.
These companies are being valued as if they will be our permanent means for identifying ourselves.
Very true. The valuation of these companies is a shot in the dark at best. We have a very limited view of the actual business: revenues, operating expenses and most importantly accounting principles that are being followed.
So it’s not that MySpace lost and Facebook won. It’s that MySpace won first, and Facebook won next. They’ll go down in the same order.
I do not think that Facebook is too big to fail, however it has grown at an astounding rate and depending on the definition of failure interpretations might vary. MySpace does appear to be in trouble. Whether the growth that Facebook has shown is sustainable, or will they begin to see users start to trickle away is the primary information that we are basing their success on. I feel this trickle will certainly occur, it depends on how big of a dip it is on their overall user base. Is user growth and the other limited information that we have provide enough information to accurately judge their success? I don’t think so.
Yet social media is itself as temporary as any social gathering, nightclub or party. It’s the people that matter, not the venue.
I do feel that social media is representative of a shift in our culture, but it often is over-hyped. However, I think that what many do not realize is that social media is in a lot of ways just another venue/market/stream. If we look at advertising expenditure, we can clearly see that the print sector has lost considerable revenue to online advertising. The questions we should be asking should focus on new business generation, new or increased advertising budgets and other factors such as an improved accessibility to advertising platforms and audiences for small and medium enterprises. If we have only seen a shift in advertising models, without an increase in expenditure, we have a stagnant market. I will leave you with his closing statement to contemplate:
The longer the company can maintain the illusion of great profits without alienating its user base, the longer they can delay the inevitable decline. But given that Facebook has already begun cashing in its chips, that moment has quite likely arrived.
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