Six reasons why Facebook wont make it to 1.5billion active users

How fast things change in the digital arena. facebooks IPO although smaller than predicted will still dwarf, the last poster boy of the dot-com age Google, whose IPO made a paltry $27Bil in 2004. Google is still the world’s most visited website with 1 billion UV’s spending nearly 2 hours on the site per month but the average Internet user already spends nearly 4 times that amount of time on Facebook. This dwel time and data facebook has on users seems to justify the $50Bil price tag alone, however its the prospects of a Billion plus active users thats really driving the frenzie. But will it make it to 1.5 Billion active users?

Momentum would suggest yes. Europe is dominating the Facebook numbers, currently standing at 223 million, followed by North America at 219 million, with Asia at 202 million users. Facebook’s growth has slowed or stopped in many of its early adopting countries such as the US and the UK. However, countries such as India and Brazil have shown strong growth. Asia however is where the great overall growth will come  as this is where growth in internet users alone is lifting all activity (see chart below). 

But is momentium enough? How long can this go on and when will we hit 1.5 billion active users if ever. Personally I think 1.5Billion will be too big ask for the following reasons.

1. Competition will hot up this year eating into growth: We are simply at the start of the social age. I believe what we see now is just the stone age versions of what’s coming. Google+ is having a dampening affect but its the small nimble pure players that are experimenting in their dorm rooms now that will make the big impact. Admittedly there are no obvious contenders but experimentation has started including 3Degrees, Pinterest , Path and Tumbler that i know of. lets face it, people are bursting to try something new.

2. Product Fatigue. As per point one, it’s that 'shiny new thing' syndrome. Facebook is already experiencing flat or decline in mature markets for whatever reason. I would suspect that the novelty has worn off with many.  Are we entering the through of disillusionment?

3. Privacy Concerns. Facebook is notorious for its poor stewartship (remember Beacon) of personal data. Its Terms Of Service are widely considered one-sided and some have gone so far as to say that they have declared war on privacy. Founder and CEO of Facebook, in defense of Facebook's privacy changes last January: "People have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people. That social norm is just something that has evolved over time." The one thing about evolution is it never stops, An awareness of the value of this data may evolve to change people tune on openness or inspire companies to help consumer monitise this data?

4. Selective censorship- China keeps facebook out, others countries will beguin to cut back on ‘free’ access to facebook following the The Arab spring which highlighted the usefulness of facebook in toppling dictators. Don’t expect the remaining despots and demi-despots with big populations (Russia, Iran, Saudi Arabia, Egypt) to allow such frank politicking on their national networks. Watch out for selective censorship just as Twitter is already doing. This has got to have an impact on use.

5. Wallstreat Acquiescence: IPO really means you have to justify the valuation and drive growth. This means lifting earnings above the 2011 $350 Million. This opens Facebook up to risky methods of increasing their earnings by leveraging users data more. This increases the chance of it messing up as it starts doing dumb things to justify a $100Bil IPO. Does anyone remember Myspace?

6. Facebooks sucess is also the seed of its own destruction. Google+ took a mere 16 days to hit 10 million users. This was done off the back of its own audience but also the idea spread through the social networks. By comparison, both Twitter and Facebook took over 2 years to hit that 10 Million milestone, requiring 780 days and 852 days respectively. I am not saying that Google+ is the sucessor of facebook, far from it, but what I am sayings is ideas, good ones i mean, now move at lightspeed and this is down to facebooks own trail blazing success. So any real competitor to facebook will have the benefit of a free ride on the established Billion plus facebook social graph. So for them to reach 100,000,000 users potentially is a fraction of how long it took facebook. 

Combined, these factors will slow, possibly stop and in an extream situation even reverse facebooks rise, and Woooooh if it does. last week Google felt the result of this type of change stunning Wallstreat by missing its targets. This sent its stock into a nose dive and triggering a flurry of questions over what went askew. All of a sudden deeper qustions on past questionable management decisions are being re-examined, like building Google Buzz, Wave . How fast things change in the digital arena.