Facebook: Is This the Beginning of the End?
Umang is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The IPO offered by Facebook (NASDAQ: FB) did not go as planned. The share prices are trading at $31.60 as compared to the initial offering of $38, a dip of around 16%. These are the sign of hard times they might have to face, a few months down the line.
The growth of the czar of social networking might just be leveling off. This is evident from the number of unique visitors in the United States that has declined from 158.69 million in April to 158.01 million in May as per the data compiled by research firm comScore. Though the average time spent by users has increased to 380.8 minutes in May as compared to 378.9 minutes in April.
These are not alarming figures but if Facebook wants to stay ahead of its competitors like Google (NASDAQ: GOOG) and Yahoo (NASDAQ: YHOO) in terms of the favorite online destination, its better they start gearing up. Let us analyze the strengths and weakness of the company to know where it stands as of date:
Strengths
Connectivity to the masses: As on May 2012 Facebook has more than 900 million users, more than half of them using it on a mobile device. This gives a nice platform for people to connect knowing the fact that they can find the rest of the world here.
Ease of engagement: The platform is easy to understand and this makes it really comfortable for people who are less tech savvy to interact with others.
Source of Entertainment: Coupled with Groupon and Zynga (NASDAQ: ZNGA) it has created a nice environment for entertainment. Many people spend a lot of time on Facebook playing games on a social environment.
Exciting Technological features: One of the reasons for failure of Orkut was its inability to adapt on a constant basis. Looks like Facebook has taken a lesson on this and are always looking to upgrade/adapt itself. New features like FB Photo Zoom, FB timeline etc. are very attractive. Its recent acquisition of Facial Recognition from Face.com might give them another exciting feature in their armory.
Challenging competitors constantly: They keep chasing their competitors constantly and upgrading their technology. Like in case wherein people were looking forward to showcase their professional profile to various companies, LinkedIn used to be their best option. However now FB has glassdoor in its apps armory which in future will definitely attract many new users.
Weaknesses
Following issues: The ease with which we can follow topics and discussion on Twitter is not an option on Facebook.
Different Segments of our life: Facebook does not have the option like Google+ of organizing lives around circles allowing an easy access to follow a set of friends, family, etc.
Video Chatting: The feature has been added to FB but the ease of video chatting that is available on Skype now owned by Microsoft (NASDAQ: MSFT) is lacking.Though the video chatting on facebook is tied up with Skype but the user interface and connectivity needs to be more friendly and faster.
"Change is the only constant thing." That is why they need to gear up also keeping in mind the stiff Competition they might have to face ahead from Yammer (Microsoft’s new acquisition on enterprise social networking) and Google+.
The failure of IPO could be because of other reasons (like overpricing , lack of disclosure, question on the measurability of performance, etc) but the decline in the number of users in the past few months is an alarming signal. They better pull their socks up........ its now or never!!
Umang27 has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
