Social Machinery

The success of Facebook, Twitter and others big social networks is showing sign of fatigue as the fad dissipates and digital natives started moving away from these crowded communities to more niche based sites.

In my perspective the later is the most dramatic problem, as Digital natives are the fuel for most web 2.0 user generated content. In its early days, social networking sites like Facebook were boosted to popularity by a youngster crowd, mainly driven by students, who saw on it an exclusive “digital life store” in which to connect with their peers and friends. But as this site is becoming increasingly popular with more than 350 Million users, the exclusivity and the sense of tribalism is all lost (moreover, when you start getting friended by your mother). Facebook is becoming “uncool” for big a part of their “founders” who were the ones bringing most of the innovation and life to the site.

Facebook has become its own enemy

Facebook is victim of their own success. As the site increased their reach to almost everyone connected to internet, the sense of coolness, uniqueness and community has been challenged. You cannot be in a community where everyone belongs; community by definition is a subset of people gathered around certain values, culture, common interests or other bond factors. Secondly, as the site increases their size, they need to find business models that can support their ramping operational costs. So then you have banks, airlines, retailers trying to “friend” you as if they were your best friends.

Unfortunately, commercialization of a community is not a very cool process and Facebook proliferation of commercial fan pages, Brand profiles and marketing driven application is in most cases tasteless. The exponential growth of Facebook and Twitter has shattered their target segment. In fact, Comscore reported that the time youth segments between 18 and 24 spent on Facebook fell by 16%. This slide began in July last year and it has not stopped since then.

Actually other consulting firms like Mindshare have confirmed a concern about people losing their interest on Facebook digital friends. Most of them have collected more than 300 friends and they refuse to keep them. In fact, the term “unfriend” is becoming so popular among Facebook That New Oxford American has chosen it as the English word 2009. For instance, people between 18 and 24 years, believes that “Facebook is undermining the quality of relationships’, and 40% prefer to visit a social networks based on specific interests, like movies or music.

Similarly, they reject tweeting preferring to use the classic Messenger and mobile SMS as means of quick and effective communication.

What about advertisers?

At the beginning Facebook was a funny showcase for sharing experiences with friends, but as more advertisers are interested on tracking the social graph and digital behavior of millions of people, the site is starting to look more like a “Big brother” experiment where anything you do is inform to the network. Even worst, companies are taking advantage of the privacy openness digital native have demonstrated, using their profile information as a source of marketing campaigns, spamming messages or even unscrupulous tracking tools. With advertisers in the middle, sharing my intimacy is not that appealing. Unfortunately for Facebook, there is no easy way out. Analysts estimate that current operating costs are roughly $200 Million USD per year and since their customer base is growing exponentially it will increase at least $100 Million more per year. In the other hand, their revenues are not growing at the same pace of it customer base; revenues were forecasted in the range of $500 Million USD for 2010, growing steadily from last year.

In that sense, if Facebook want to increase their ad spending share this year they’ll necessarily need to give more subscriber data to advertisers, which increase the chances of losing users. In the case of Twitter, things are not more exciting. After three years in the market, the microblogging site is showing sign of exhaustation.

According to Nielsen report between September and October 2009 the number of visits declined by 28%, far away from the continuous growth Facebook has shown: 350 million users, 2.500 million photos uploaded per month, 1.600 million messages a day. Also, ComScore recent data shows that the number of unique Twitter subscribers felt 8.1% in October last year. This negative trend coincided with Twitter’s intention to start charging for some services.

Is Myspace the first site to fell in combat?

Two years back Myspace was the biggest social networking site in the world. The site promised to connect the digital community with their artist almost on real time. Today, the site lost their battle against Facebook, reduced their staff in 40%, closed several international offices and publicly resigned to compete with Facebook in the race for being the number one Social networking site. Thus, the market share of MySpace in the social networking arena has declined from 66% in 2008 to 30%, according to Hitwise. The situation is so complex that MySpace recently revealed that it had failed to attract enough traffic to meet their objectives set in its advertising agreement with Google and, consequently, would lose $ 100 million this year.