We've seen the rapid rise of Facebook; are we going to see it die just as quickly as it burst in to life? Back in September 2006 Facebook was in negotiations with Yahoo with up to $1 billon on the table. One of Facebook's board members, Peter Thiel, indicated that the company valued itself at $8 billion based on projected revenues for 2015. In October 2007 Microsoft announced it had bought a 1.6% stake in Facebook for $246 million. That would put the valuation of the Web site at a whopping $15 billion!
So what makes a social networking Web site that valuable? Facebook's only real stream of income is via advertising (plus investors of course). What makes a company want to advertise on Facebook? Facebook can target ads at very specific groups of people meaning that they are delivered directly to the people being targeted by the retailer. That's very valuable, but it relies on the user base and this is why Facebook may be about to take a tumble. Why? Quite simply because social networking Web sites come and go. There have been too many to mention and eventually people get bored with them and move on to something new. Peter Thiel's assumption that there would still be a Facebook in 2015 is most likely fatally flawed.Five percent fewer people in the UK visited Facebook in January than in the previous month. That's 400,000 people who decided not to log on anymore. I've had three or four friends tell me they've left Facebook in the past few weeks. One of the biggest complaints was the pointless garbage generated in bulk by applications--someone throws a chicken at all of their friends, someone else sends a video, and so on. Personally, I refuse to install the applications and ignore the constant requests to install them. I think that's probably going to be the reason most people get sick of it; Facebook was great as a way of keeping in touch with your friends. They should have kept it simple--friends, photos, groups and messaging. What more does a social networking site need?
Unfortunately, I think Facebook is doomed to the same fate as MySpace which saw 14% of its UK users disappear over the past three months. I bet Yahoo are glad they didn't pay $1 billion for it!