SocialMediaBust

In an article written earlier, The Coming Social Media Crash: Similarities With the dotcom bust #2, I mentioned that one of the indicators (viewed in the rear view mirror) of business failure during the dot.com boom/must cycle in 1999-2000 was that companies changed their business models significantly once they realized that the hype and hope was...well, just that. For example, many companies, faced with huge revenue shortfalls attempted to move from ad supported websites to user fees.

I suggested in the article, that Ning is one of the first companies to do that in the current boom/bust iteration, and that if this becomes a trend it will confirm that we are beginning the downward cycle. It's not a done deal kind of thing, but it is an indicator.

This week Facebook, which is probably the most stable and secure social media platform in terms of revenue (for the moment) announced it was expanding its offering through a new "Questions" area where people will be able to "crowdsource" (our word not theirs) answers to whatever questions they might have.

Is this good news? What does it mean?

This is probably NOT good news. First of all, at this point (it's just rolling out in limited Beta), there is nothing new here. Yahoo, and Answers.com have been doing this for several years. That wouldn't be of great concern, except that when one looks at the future of a company, one looks at its ability to innovate and create new services distinct from what already exists. This is not one of those.

Second, the success rate of companies adding services of various types to their existing business model is low. Yahoo couldn't do it, and kept trying new things, only to fail rather miserably. Even Google's success rate is amazingly miserable. Essentially it has had two huge successes that power it, and everything else either sucks money out, or is neutral. (Its winners are their search engine, and their ad platform, adwords/adsense). It's unlikely that a Questions area will increase visitor length and page views (which is important for advertisers) in a way that will make the web real estate more valuable.

Third, we harken back to whether this is indicative of a sense, within Facebook, that they are at risk with their present services and business model. That is probably the case. There is some indication that people are spending less time on Facebook (it's too early to know if this is a trend without having Facebook's proprietary data), and that users are unhappy with Facebook.

Without additional information, which Facebook possesses, it's not possible to tell whether this is consistent with a company that is searching for ways to grow due to a sense of threat, or whether it's just a natural progression, but if I had to choose I'd say they are acting on information that they have.

That said, they may be able to do the "Answers" thing better than those that have been doing it for years. That's always the key. Can a business do something MUCH better, and then monetize it. Only time will tell. But first, they need to get it out in beta, and then they need to put it into full production.

Some programs never even get out of beta, so we wait. But I am not seeing this as a positive move. You?