March 30, 2017
About the author : Joni holds a PhD in marketing. He is currently working as a postdoctoral researcher at Qatar Computing Research Institute and Turku School of Economics. Contact: joolsa (at) utu.fi
This Inc article states a very big danger for Facebook: http://www.inc.com/jeff-bercovici/facebook-sharing-crisis.html
It is widely established in platform theory that reaching a negative tipping point can destroy a platform. Negative tipping is essentially the reverse of positive tipping — instead of gaining momentum, the platforms starts quickly losing it.
There are two dimensions I want to look at in this post.
First, what I call “the curse of likes“. Essentially, Facebook has made it too easy to like pages and befriend people; as a result, they are unable to manage people’s newsfeeds in the best way in terms of engagement. There is too much clutter, leaving important social information out, and the “friend” network is too wide for the intimacy required to share personal things. The former reduces engagement rate, the latter results in unwillingness to share personal information.
Second, if people are sharing less about themselves, the platform has it more difficult to show them relevant ads. The success of Facebook as a business relies on its revenue model which is advertising. Both of the aforementioned risks are negative for advertising outcomes. If relevance decreases, a) user experience (negative effects of ads) and b) ad performance decrease as well, resulting in advertisers reducing their ad spend or, in worst-case scenario, them moving on to other platforms.
To counter these effects, Facebook can resort to a few strategies:
Overall, Facebook as a platform will not be eternal. But I think the company is well aware of this, since their strategy is to constantly buy out rivals. The platform idea persists although individual platforms may perish.