Facebook’s staying power, trust issues bubble up ahead of IPO
By Hayley Tsukayama,
After eight years, Facebook is poised to join the ranks of tech titans such as Google or Apple — or to follow a boom-bust cycle like so many other tech startups before it.
The social network leaps into the fray this week as it starts trading on the Nasdaq. The biggest unknown that the company faces going into its initial public offering is how long the social network will be able to stay hot.
The perceptions of Facebook’s staying power and the viability of its stock differ based on the age of the person you’re asking. According to an Associated Press-CNBC poll released Tuesday, 59 percent of U.S. adults under 35 said that they think the stock is a good bet. By comparison, only 39 percent of senior citizens made the same assessment.
Right now, things are looking good for Facebook: The site leads user engagement online, accounting for 14.6 percent of all time spent online in 2011, according to comScore.
But how long can it last?
In a business with such high turnover (see for reference: MySpace, Friendster), it’s hard to predict when and how quickly a social network will lose its clout among users. Half of those who participated in the poll said that they think Facebook is a fad. About 46 percent of users said they they think Facebook’s appeal will fade over time, while 43 percent say that it will endure.
Facebook is trying to combat the idea that it’s just another social network by building out its developer relationships with companies such as Spotify, Netflix or Nike, but even those partnerships come with their own hazards.
According to the poll, about 57 percent of users said that they never click on ads or Facebook’s sponsored content. Only 12 percent said that they feel safe making purchases over Facebook’s infrastructure — a large obstacle for the company’s announced app center to overcome if it has to deliver consistent revenue growth for its investors.
Once Facebook goes public, it will have to focus even more closely on advertising, which means that the network will be in search of new ways to advertise. Users will most likely see more of the attempts at brand engagement and more use of Facebook Credits as the company builds out its development platform to be more attractive to advertisers. And that will probably make the average user uneasy, exacerbating users’ wariness about the network.
The company has been telling users more about how it uses their personal data in the wake of a settlement with the Federal Trade Commission, and has raised its public image in small ways such as holding a live privacy chat with its head privacy officer or using its social reach to promote organ donation.
Yet while 71 percent of those polled in the AP-CNBC poll said they have a favorable view of the company, 59 percent of those polled said they don’t think the social network will keep their personal information private. Privacy issues are keeping away potential users as well: 21 percent of those who don’t use Facebook cited privacy as their primary concern.
To grow its business, Facebook will have to convince those users that it’s safe to share their personal, financial and social information with the company. That’s a tall order, and it will be interesting to see how the company balances the demands of its investors and advertisers with what the company proudly says has been its mission all along: user experience.
(The Washington Post Co.'s chairman and chief executive, Donald E. Graham, is a member of Facebook's board of directors.)