Facebook Desperation Watch: U.S. Users Are -- Get This -- Dropping
What are the scariest two words for an Internet high-flier? No growth. And yet in its core North American markets, Facebook has gone way beyond that. According to Inside Facebook, Facebook has actually lost regular U.S. users -- a small but significant number of the people who sign in every month. There were additional losses in the U.K, Russia, and Norway.
Although Facebook's global audience of regular users continues to grow, it's rising at a slower rate than just a few months ago. That's a big problem for the company, which has pulled in an estimated $2.34 billion in funding and wants an IPO.
Big investors pay big bucks for big growth, because that's what helps fuel high valuations and major ROI. Facebook faces a natural limitation to expanding markets, which explains the growing sense of desperation in its marketing activities. Is Facebook -- or any of the high-flying Internet companies -- ready to shift from a growth-focused mentality to one of sustainability and more conservative expansion?
Infinite growth doesn't work in finite markets
Slowing growth shouldn't surprise anyone. Everett Rogers came up with a mathematical description of the diffusion of innovation in the 1940s that applies. Here's a graph, from Wikimedia Commons user Tungsten, that demonstrates the concept:
Outside of such rare examples as television or telephone service in western countries, which have seen market penetration surpassing 98 percent, nothing else comes close. A few companies seem to buck the trend. In high tech, Apple is the main example. And yet, its growth rides the relatively new technologies of smartphones and tablets that are still early in their adoption phases. Barring some new concept, Apple's growth, too, will slow.
Maybe Facebook is an exception, but it doesn't seem to be, as the company's expansion in a country slows at 50 percent penetration. Eventually, people have either tried it and found it wanting or heard about the service and weren't interested.
Internet companies don't get to start over
Apple could always pay dividends to investors. Internet-based companies, however, have traded on rapid expansion for years. Few seem to have a business plans to shift when growth slows.
Maybe it was different for product-based businesses that had to physically introduce themselves to a new country. The process was time consuming and long, leaving them with enough time to create new product concepts to ride the diffusion rollercoaster all over again.
That's no longer the case. A company can create a web service and have it used all over the globe inside a few years. These businesses don't have a physical product's built-in success hurdles that create time for more innovation. Moving into China might mask the problem for some years. But how long before Facebook -- or Twitter, or any other Web-based company -- has maxed out the number of customers it can expect to have? And what do they do then?
Related:
- Facebook's 5 Step Plan to Ignore Privacy and Collect More Personal Data
- Twitter Adds Instant Follow Button to Lock In Its Audience
- Zuckerberg Kills What He Eats and Puts His Foot in His Mouth
- Zuckerberg: Sure, I Want Pre-Teens on Facebook. Just Not Now
- Facebook Lifts Promo Restrictions, Lets Marketers Doom Themselves
Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.
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