Facebook’s Challenges, A Global Perspective

Will Facebook Turn 15?

On the 19th of February 2014 Facebook announced it is buying WhatsApp for $12 billion in stock and $4 billion in cash. There have been numerous speculations about the motivations of Facebook to do this.  WhatsApp, with its 450 million active users, was becoming a serious threat to Facebook. Besides the fact that Facebook would be interested in gaining access to telephone numbers and private messages of WhatsApp users, there is also the suggestion that Facebook is trying to eliminate competition with this take-over. Either way, Facebook is in major trouble and WhatsApp was only one of its problems.

Killing competitors by buying them is not a sustainable growth strategy for a social network that is easily replaceable, has a bad reputation on dealing with privacy concerns of its users and depends on conventional advertising models.

As soon as the take-over of WhatsApp was announced, users started migrating to The Telegram messaging app in massive numbers across Europe. Within only half a day over 500,000 people in Germany, The Netherlands and Spain dropped WhatsApp for The Telegram. This app became the number one download in both iTunes and Google Play app stores. Why? Because users are concerned about Facebook’s dominance. They do not want Facebook to buy access into their private communications. This is also the reason why Facebook’s own messenger app has never quite made it. Is Facebook going to buy The Telegram too?

A couple more challenges for Facebook

Younger users of Facebook are already leaving the platform and others are becoming less active on the social network. Such take-overs are certainly not motivating for the remaining users. Add to the context the fact that Facebook’s growth outlook for Asia, their main hope for growth, is very shaky because of the presence of strong local competitors that are embedded in local cultures and understand what users want (WeChat, Line…). These competitors are not sitting and waiting and have their own global expansion plans.

To make matters more challenging, Facebook’s mobile revenue growth is difficult to sustain. It is only a matter of time before advertisers realise that their investments in Facebook is not paying off, just as they did with Facebook’s desktop advertising. For a company that has global ambitions, Facebook lacks knowledge of the mobile channel and how it is used across the world. Media usage and online behaviour change drastically once you move outside US and Western Europe and these are essential factors in Facebook’s business model. These new unknown territories mark only the start of additional challenges for Facebook.

What do you think? Will Facebook be there in 2024 to celebrate its 20th birthday?