Facebook’s dilemma after two years of record growth is how to grow the next 175 million users. Where are they? Easy answer is China. Sure there’s Europe also. But that’s 20 languages and Facebook already seems to be making headway into places like the UK. But China remains the elusive prize.
Five years, $500 million invested in it and 175 million registered users later does Facebook have growth questions? Yes, size matters on the Web where attention spans for friend networks last about as long as the buzz from a Red Bull soft drink. After all, anyone remember Friendster, the first mega social net? How about Ryze? Six Degrees? Even MySpace has lost its edge.
On the Web with no real emotional connection these networks become like flavors of cola. Coke, Pepsi, RC, or the Chinese made Future Cola. Cola seems to taste the same, social networks seem to be similar. Buzz means growth.
A few months ago Facebook reportedly saw smallish Twitter (3 million reported users) as a growth tool and offered to buy it for $500 million. Twitter turned it down, reminiscent of Facebook spurning offers from Yahoo and others of over $1 billion just over a year ago.
In the U.S. Facebook is the 4th most used website now. College students, professionals, educators and brands all invaded the service a little over a year ago when Facebook opened its doors beyond the initial college user base. Suddenly your mother in law is your friend on Facebook, which is actually kind of bizarre in many ways.
The secret to Facebook’s exponential growth has been opening up and also turning itself from a service into a platform via its API. Through the Facebook API thousands of third-party developers built applications (and businesses) on Facebook. Example, Slide.com, Rockyou, and many more.
What Facebook did correctly was realize that nobody had a social network platform, that the key to success with a Web-based company is not just the user base but giving outside developers the keys to create businesses on the platform.
Apple is doing the same thing with iPhone (and did it earlier than Facebook). What Apple and Facebook learned is that Microsoft became the dominant PC operating system not from the operating system but by allowing third-party developers to write applications that used the Microsoft OS as the foundation. 32 years later and Microsoft still owns the PC platform.
Do you think Bill Gates was thinking of global domination here:
The race for the ’social network operating system’ (snos) is on. Microsoft owns a small piece of Facebook, though not much. But if it was smart it probably negotiated for first right to acquire Facebook before anyone else can. Now may be a good time, in the last year Facebook’s valuation for common stock reportedly has dropped from $15 billion to $3.76 billion. $5 billion and Microsoft owns it.
In terms of winners you could call Facebook champion. After all, it would really have to screw things up to lose its position. Facebook also just turned its user profiles into “streaming” updates so that users can answer “what’s on your mind?” as they login, basically stealing Twitter’s thunder and growth curve in one swoop (ok, don’t accept our $500 million, we’ll just copy it and deploy it into our user base which is 50x larger).
Facebook is the largest photo sharing site in the U.S. with more than 4 billion photos uploaded.
But it would be a mistake to believe that Facebook will win the war. The battle? yes, this first one. But across the world many social networks have established themselves and built larger native user bases that Facebook will find hard to dislodge. Sort of like the image of Britney Spears OBGYN exit from the limo will be hard to purge from memory. An entire generation lost in one image.
Facebook has been smart in several ways, though, that many may not have noticed. Consider that China billionaire Li Ka-shing invested $100 million. And rumor has it that Facebook has been sending small envoys into China to try and figure out how to become the largest social net in China.
30% of Facebook users are in the U.S., followed next by the UK with 7% of its users. Chinese Facebook users account for only 2% of its users or under 4 million people — that’s small in a country with the largest Internet user base in the world with 300 million users, 70% of them on broadband connections.
So Facebook has its work cut out for it in many spots around the globe where it must grow now that 1 in 4 U.S. Internet users is on Facebook. Growth from here is almost ALL international.
Which is why in China a homespun company, Xiaonei, with about 40 million registered users is the leader there. 87% of Xiaonei users are in China and 2% are from the U.S., which is an exact mirror of Facebook’s Chinese user base of 2%.
Most Americans have never heard of Xiaonei and probably never will, although it’s raised more than $430 million from Oak Pacific Partners (which is backed by U.S., Chinese and Japanese investors). Investors mean nothing if the fickle users go elsewhere, to the new “new thing”. As the masses invade Facebook it’s coolness factor drops dramatically.
Remember that today’s Facebook can be tomorrow’s Friendster, popular but fleeting. That’s the power of the Web and appeal for entrepreneurs, the evolution is never-ending. Facebook’s goal of being the SNOS may turn out more like the dog treat: Snausages.