Facebook must evolve or wither, say analysts

By Isaac Davison

Almost a quarter of New Zealanders use social network site - but will they pay and stay?

Photo / Rotorua Daily Post
Photo / Rotorua Daily Post

In the fickle world of social networking, Facebook is ubiquitous. But will you still love it tomorrow?

Bebo and MySpace, so recently the darlings of social media, have been completely overshadowed by Facebook, which ballooned to 400 million users this year - 1.1 million of them in New Zealand.

Twitter has swallowed up some of the traditional sites' numbers, as users swarmed to its simple, clean, and functional site. But it is still dwarfed in New Zealand by Facebook, which receives more than 40 times the number of visits.

The rapidly changing world of social media is often good for consumers, who can shift in a few mouse clicks to whichever site they like best, usually without paying a cent. But it poses headaches for businesses trying to stay ahead of the game and turn a profit.

While analysts say Facebook is sustainable because of its older, less restless users, they believe it will have to evolve to still be relevant in as little as two years.

Bebo's usage has plummeted. Its largely pre-teen and teenage users have dwindled in numbers from 1 million in June last year to 600,000. AOL bought Bebo for $1.2 billion in 2008, but has conceded that it will have to close down the site or sell it this year.

The Rupert Murdoch-owned MySpace, once the third-largest site in the US with 100 million members, has had to reposition itself as a leader in online music.

Information technology commentator Peter Griffin said both sites failed when their owners pushed too hard to "monetise" them. Bebo's users in particular were likely to have low disposable income, and were scared off by targeted marketing.

Social networking has huge earning potential - Facebook's brand is valued at US$5.5 billion ($7.59 billion).

But it is a tough market. As well as the dizzingly short lifespan of online trends, users are used to getting everything online for free.

"At the moment there's no clipping of the ticket going on. People aren't clicking on ads and spending money," said Mr Griffin.

Sandra Hanchard, senior analyst at internet researcher Experian Hitwise, said Facebook's long-term popularity would depend on whether it could evolve, and increase its earnings, without bothering users who are precious about changes and privacy.

This is a difficult task - minor tweaks to Facebook are met by howling indignation from its users.

Analysts pick that the future of social networking is in a single identity which gathers all of a user's websites and unlocks all of them with a single login and password.

This would see large companies such as Apple provide a single, personal page which gathers all of your internet interests - email, Twitter or Facebook updates, blog entries, articles, and banking - and puts them into one place. Users would delve into every corner of the internet without ever leaving the Apple-sponsored page.

The digital identity would also tailor websites to a user's interest. When visiting a news site for the first time, a user could see which of their friends liked recent articles.

Facebook founder Mark Zuckerberg compared the idea to "an old saying that says when you go to heaven, all of your friends are there and everything is just the way you want it to be".

He recently launched Facebook's digital identity, Facebook Connect.

Google also has its own model, called Open ID. Mr Griffin expected these to dominate the social networking landscape in the next two years.

"Major websites are scrambling to be included, with Microsoft, PayPal, Apple and others all realising how powerful it would be to have one logon."

Mr Griffin said a single identity would give users an improved sense of security, which would make them more confident in making online purchases.

"When people become willing to spend money through a window like Facebook, that's when we'll see these [social networking sites] become truly entrenched."

CHANGING FORTUNES
Market share of social networking sites

Bebo:
July 2007....20%
March 2010....2%

MySpace:
July 2007....7%
March 2010....1%

Facebook
July 2007...3%
March 2010....46%

QUICK GUIDE TO SOCIAL NETWORKS

Facebook
Facebook allows users to create a profile page, usually under their real name, and add friends, with whom they can share photos, messages and video. Users can also update their "status", which all their friends can view. It targets users of university age or older. Facebook has a clean appearance, with targeted advertising.

Twitter
Twitter users, usually more mature internet users, write text-based messages, or "tweets" of up to 140 characters. These are displayed on the author's profile page and delivered to the author's subscribers, who are known as followers. The network gained great popularity during the 2008 US presidential race when Barack Obama used it as a tool for communicating with supporters.

Bebo
Bebo allows users to send messages, share photos and design their own profile page. Its users are predominantly pre-teen and teenagers, many of whom use nicknames or pseudonyms. Any internet user can view users' profiles unless strict privacy settings are used.

MySpace
The first major social networking site. Users create their own profile page, describing themselves in boxes such as "Interests" and "About Me". It is mostly used by teenagers. It has a strong focus on music, with many independent artists getting their kickstart from grassroots support on MySpace.

- NZ Herald

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