Tom Denford and David Indo from ID Comms: has Facebook peaked?

On this week’s #MediaSnack Tom and David look at the challenges facing Facebook and ask if the company can maintain its incredible rate of growth. This is going to be hard for a business for that relies on advertising for more than 98 per cent of its total revenues.

Facebook’s growth continues to be meteoric in spite of its scale, with revenues in 2016 growing over 50 per cent year on year. Monthly average users now exceed two billion, which makes Facebook one of the most adopted inventions in the history of mankind.

However, in the last year, alongside the success story there have been some dark clouds appearing on the horizon for Facebook, notably:

1. Metrics – the almost monthly revelations that Facebook has overstated the effectiveness of its advertising products.

2. Accountability – there have been many calls for Facebook to drop the walled garden, stop “marking its own homework” and get MRC accredited.

3. Fake news – Facebook accounts are widely claimed to have been used to manipulate voting in the US.

4. Censorship – Facebook has adopted a seemingly confused policy around what is acceptable and is increasingly behaving like a media company rather than a technology company in this area.

5. Data and privacy concerns – recent reporting highlighted consumer concerns that Facebook has become the world’s most sophisticated surveillance operation. The company’s vast ad revenues suggest that this ability to monetize user data for targeting advertising is Facebook’s greatest value.

So has Facebook’s value peaked? Tom and David argue that there are number of key issues that will determine if that’s the case:

Will Facebook increasingly behave and be treated by regulators as a media company?

Has Facebook hit user saturation. Where do the next billion users come from?

Can Facebook minimise churn, especially in the younger demographics where Snapchat and Musicly are focused on stealing away Facebook users?

Can Amazon take a chunk of Facebook’s ad revenues? With Amazon providing a hugely compelling alternative in many Western markets you’d imagine there’s a risk that Facebook’s advertising revenues can only go in one direction.

Will consumers take a different approach to their data, triggered by regulations such as GDPR (General Data Protection Regulation)? Consumers could become savvier about the terms and conditions.

On this week’s Good Week Bad Week Tom and David celebrate the amazing Singles Day on Alibaba which posted $25bn revenues in one day, so a great week for them.

A Bad Week for anyone hoping for a budget 2018 trip to Cannes Lions Festival. The owners of the Festival revealed, after some apparent consultation with agencies, the new ‘slimmed down” version which was more of a token trim than a haircut. The changes won’t make any perceptible difference to the vast costs endured by agencies and vendors attending and Tom and David argue this is a missed opportunity to make Cannes more relevant to the next generation in our industry.

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