The end of Facebook and the rise of LinkedIn

I want to make a bold prediction: Facebook will not be the head honcho in social media by 2020. In fact, I believe LinkedIn will surpass the value of Facebook in that time. Why? The main problem rests with the way Facebook makes their money. Their money model is in direct conflict with their customers wants. Just like Yellow pages and free to air TV before them, Facebook is caught in the dilemma of increasing advertising to feed the shareholders by interrupting users enjoyment of the site. Essentially they are pissing off their users to earn more bucks. Here are my three reasons why Facebook will fall and what they can do to fix it.

 

THREE REASONS FACEBOOK WILL FAIL

1) Sharemarket Listing: I have been predicting Facebook will fall from grace as the top social media site since the day they listed on the New York stock exchange in 2012. I have worked for several global IT companies and understand the pressure of quarterly earnings first hand.  At HP and IBM the pressure of 'making the numbers' was intense, even at the detriment of client satisfaction, staff well-being and the company brand.

The problem in the system is that the shareholders only measure success in short term financial measures. By being part of this system, Facebook now is under pressure to ever increase returns to shareholders. There is never enough profit, they always want more. Hence the rapid increase in advertising products and revenue since listing.  Sure Facebook is celebrating their financial success now, but at what cost? The issue is that if financial success comes at the detriment of client satisfaction you only hold clients until a better solution comes along.  So the more money you make the more clients you lose. Yellow pages becomes Google, Free TV becomes Pay TV and Facebook becomes...the next big thing.

2) It's just not cool anymore. Think about the people who are joining Facebook now. Grandparents are the fastest growing segment of new Facebook users. The youth have already turned off in favour of the advertising light Instagram, which Facebook bought in 2012 for a cool $1billion. 

The issue is the temptation to advertise on Instagram is too strong. If Facebook starts to drop revenue, where will the advertising dollars come from? The popular product where the users are of course! Right now that's Instagram. They have already started this program but it is quite minor; for now. Then when Instagram becomes less cool, where will the users go next? Facebook can't buy everyone, especially after spending a ridiculous $19 billion in 2014 on a non-revenue product WhatsApp.  Clients will just go to the next best free product that doesn't have as much advertising.

3) There is no loyalty, only scale. The reason Facebook is the number one social product now is that 'everyone' is on it. It's scale, not to be confused with loyalty. Apple has loyalty, Facebook has scale. There are a lot of users annoyed at the privacy issues, advertising intrusiveness and constant changes at Facebook. But they don't move to another platform as their isn't a suitable alternative which has the same scale. 

I remember a similar situation at Yellow Pages in Australia. I started there just at the time when they realised that digital was going to eat their print lunch, so I was hired to market the digital offerings. Yet they couldn't quite let go of the print cash cow. It was too tempting to keep charging clients huge fees for their listings.

I remember being in the boardroom in the final year, when the financials were being presented. Revenue was the highest ever, genius! However client satisfaction and numbers were crashing - basically they just charged the remaining few more. Not so smart. The final few clients hung onto Yellow as they were too afraid to not be in the book.

But soon the tipping point arrived and EVERYONE jumped off at once. In two years the book was a shadow of its former self.  Facebook will face the same future if they keep increasing advertising and eroding client satisfaction. There is no loyalty with these sites, not with clients and not with advertisers.

WHY LINKEDIN?

Who will be the next king of social media? My prediction is LinkedIn. Why? Because their business model isn't competitive with their customers. They have advertising but it is less than 20% of their overall revenue. Their real business is premium accounts, which means you pay for what you get. This is aligned with the users needs so if you want more. you pay. If you don't want more you don't and the standard product is still super useful. 

Secondly, Facebook is entertainment and LinkedIn is knowledge. With the overload of information and entertainment options at our fingertips, Facebook faces competition from other forms of entertainment. LinkedIn however is useful and getting even better over time. Having blogs and famous influencers keeps it ahead of the crowd. People will turn off cat videos and turn more towards blogs by Richard Branson.

WHAT CAN THEY DO?

What can Facebook do to reverse this trend? My thoughts are to provide a premium service with no ads. Just like Spotify, Netflix and other content providers, you pay for convenience of no ads. The other suggestion would be to offer more business services to clients, not just advertisers. Advertisers are no use without the clients to communicate too.

Facebook is a massive business and some would say too big to fail. Enron anyone?? With their bloated overheads, hungry shareholders, limited revenue channels, reduced client engagement, falling client numbers and big spending founder, I believe it is only a matter of time before Facebook falls.


If you liked this blog don't miss out on the next one! Subscribe now to get them in your mailbox each week. What's the worst that can happen, you can always cancel and you just might learn something valuable :)

As an added bonus all my visitors can download a complimentary copy of my book 'Creating a Powerful Brand' by clicking on the book menu button or here. Tell your friends we have load of eBooks! It will change your life or you money back. Enjoy!

 

(the link is http://www.andrewford.com.au/book/)

Andrew Ford

Social Star, Level 4, Suite 402, 517 Flinders Lane, Melbourne, Australia

Marketing expert Andrew Ford, the founder of Social Star, has discovered the secret of ‘Powerful Branding’. With a fire for unleashing people’s inner brand and developing business models to generate profit from an individual’s passions, Andrew leverages ground-breaking digital and social media marketing techniques to create digital strategies for clients to attract maximum opportunities. Having established a strong name for himself in the field, Andrew blends traditional business techniques with now-necessary tools for entrepreneurs to achieve scale, quality, and influence in their niche. Andrew’s comprehensive business background and qualifications consist of a Bachelor of Business (Marketing) (RMIT 2003), a Graduate Certificate in Management (MBA Executive Program, University of Sydney 2005), and a Masters of Entrepreneurship and Innovation (Swinburne University 2011). Continually on the cutting edge of his own education, Andrew has tested his marketing theories in forums such as the BCG Business Strategy Competition, which he won in 2005 against all Victorian MBA schools, and the Venture Cup Business Plan Competition (Swinburne University 2003), which he won in the Masters category. With experience working at Hewlett-Packard, Sensis (Telstra) and IBM, Andrew also has mentored dozens of junior staffs to help them achieve their professional goals. Meeting and influencing high-profile public figures helped Andrew to realise just how many professionals require more understanding and control of their public brands or appearance, and need help with the skills to use the many amazing free tools at their disposal to generate success. At Social Star, Andrew consults with clients to uncover their personal brand – both where it is today and where it can be tomorrow – and refine and define how that should be displayed in social media in order to attract their perfect target audience. Andrew mentors his clients to rapidly grow their business’ audiences, resulting in larger potential client bases and higher revenue. Applying formulas that integrate over twenty years of Andrew’s business experience and fifteen years of formal business education, Social Star specialises in building clarity and velocity for clients’ brands using the ‘Understand, Build and Leverage’ methodology. ‘Having a Personal Business enables people to have an authentic, congruent connection with their valued clients and partners, using their brand as the bridge,’ says Andrew. ‘I’m highly driven to work with the new breed of entrepreneurs and small business owners – people who have a passion for making the world a better place. Traditional business models are stepping aside as people follow their innermost dreams and my role is to see them operate within their values while creating wealth. Some people think you have to sacrifice what you love to be successful in your business, yet it is actually the opposite. Follow your passion and success will come.’ Lecturing at Swinburne University from 2009 to 2011 on brand dynamics and digital marketing, presenting at numerous conferences, and consulting to hundreds of clients, Andrew has seen his philosophy work that if you follow your unique path, based on your skills, experience, values and goals, you will automatically attract the opportunities you desire and achieve the success you deserve. Living his mantra, Andrew has created a successful business and attracts high-profile clients including musicians, athletes, authors, models, entrepreneurs, professionals and small business owners, helping them find their ‘why’ in their business and fulfilment in their lives. Business for Andrew is more than work, it’s personal. Running a personal business means that he is able to fulfil all of his values rather than separating his life from work. It supports his two boys while providing social opportunities, educational development, fitness opportunities, spiritual fulfilment and many valuable friendships. Social Star has now become the vehicle for Andrew to crystallise his mission in the world, to help people love what they do, supporting his ‘why’, that if more people loved what they did, the world would be a better place.