Is Facebook a One-Trick Pony?
Feb 1st 2013 5:00PM
Updated Feb 1st 2013 5:35PM
Facebook took the world by storm and built a social media empire founded on the idea of sharing information with peers. With over 1.06 billion users and counting, it's safe to say the platform has been a smashing success. Now that Facebook is publicly traded, investors have been waiting for the company to drive new innovation to its business outside of its social media platform, much in the way that Google innovated beyond Google Search. So far, the consensus has come up short and Facebook has been largely focused on driving enhancements to its core platform. Could it be that Facebook is a one-trick pony that only knows how to socialize media?
A serial copycat
Facebook has shown a long history of "borrowing" features that other companies have had success with. In December, Facebook began trialing a message feature similar to LinkedIn, where Facebook charges a user $1 to send a message to an unconnected recipient. On the surface, this move helps thwart off spammers and encourages the connectedness of its users. The alternative view suggests that Facebook is actually on the defensive and fears its competitors.
Perhaps the most flagrant offense is with Facebook's Poke app, which is a complete rip off of Snapchat, a mobile app that allows you to share videos or pictures with friends for as long as ten seconds before the picture self-destructs. Snapchat is currently the No. 17 free app in the Apple App Store, and Poke didn't even make the top 200. In other words, Facebook did not add any meaningful value to its platform.
The innovator's paranoia
When Facebook launched, it defined social media and all the possibilities that came along with it. Nowadays, it seems that Mark Zuckerberg lets the competition too heavily influence his thinking. This approach allows Facebook to remain relevant and current within the scope of today's social media, but it fails to address the unmet needs of its users. It's almost as if Facebook will be the next chapter of the Innovator's Dilemma, arguing that successful companies that put too much emphasis on meeting current customer needs, and not enough emphasis on unmet needs, are at risk of falling behind.
A hint of protectionism
Facebook's newest feature, Graph Search, allows users to search within their social network to find things of interest. You can search for things like "friends who like underwater basket weaving" and bam! -- a list of all your friends that share your true passion will populate. Think of it like Yelp, except you're connected to all the reviewers in some way. Facebook seems to believe Graph Search is a killer feature that other competitors will want to leverage for their own interests, which is why the company has gone on to restrict use of Graph Search and its Find Friends feature. Apps that are found to "replicate" a core Facebook product or ones that don't easily share back with the social network are at risk of being banned. Twitter's Vine, Yandex's Wonder, and Voxer, all have been restricted from accessing Facebook's developer platform in some way. It seems that Mark Zuckerberg only advocates an open Internet as long as it doesn't pose a threat to Facebook's business.
Social media companies may come and go, but the Internet is here to stay. Facebook has yet to show investors that it's diversifying beyond its core business to better secure its place in the future. Given its recent history of imitating the competition, I don't get a sense that Facebook will be the type of company that will continue to surprise investors. That said, as active user growth begins to wane on the social network, it's up to management to improve monetization efforts to grow profitability. Considering that Facebook's active user base increased by 25% year over year and its average revenue per user only increased by 12%, its monetization efforts need to be improved -- and fast.
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The article Is Facebook a One-Trick Pony? originally appeared on Fool.com.Fool contributor Steve Heller owns shares of Apple and Google. The Motley Fool recommends Apple, Facebook, Google, LinkedIn, and Yandex. The Motley Fool owns shares of Apple, Facebook, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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