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The 3 Biggest Threats to Facebook and its dominance in Social Networking

Updated on May 21, 2012

Is Facebook the next Myspace?

Once, only about 5 years ago, Myspace was the most talked about online destination - it was the number one visited site, and was destined to dominate this new-fangled thing called Social Networking. Then along came Facebook, and soon Myspace was declining as rapidly as Facebook was growing. Could the same thing happen to Facebook, and if so where is that threat going to come from?

First things first, could such a thing really happen? Is Facebook not too big to fail? The answer to that is surely no, it's not too big to fail. I'm not saying it would disappear overnight, Facebook itself is here to stay for a long time yet, but it's place as the top dog in Social Networking is never secure. The internet is too fast moving, and the barriers to entry too small for that. The nerdy kid next door could be busy creating a Facebook killer in his bedroom right now, and if not him (or her) then there are big internet and technology companies with a lot of money and clout that would love to take Facebook's place.

I think there are three main threats that Facebook faces. I've not counted Facebook itself as a threat, but depending on the actions in takes over the coming months and years it could weaken itself, leaving it vulnerable to outside threats.

1. The Major Competitor

The single biggest and most obvious threat to Facebook's dominance of the social space is a direct competitor going head to head in competition with Facebook. To be a direct threat they would have to offer much of the functionality that Facebook itself offers but have significant advantage too, either a 'killer feature' or a clean, uncluttered design that appeals to people more than Facebook's messy, busy pages. Or both. It should be noted that the clean, uncluttered and ad-free design of Facebook was thought to be one of the key features that drew people away from Myspace and to its site.

At any given time, there are many tiny social networks that show up on the scene, but most are short-lived. They get a bit of venture capital seed money, then when they fail to make a success of it the money dries up and the site disappears. Current examples of these are Zurker and Diaspora. There is always the chance that one of these has the breakthrough it needs to reach the mainstream, and if it has the 'cool factor' then it could just make it to the big time.

At the moment however, the only major competitor on the scene is Google Plus. It is backed by Google's extensive web presence and financial clout, and is important enough to the search giant that it's going to be around for a while. Despite this however, in the few months they've been around, they have had mixed success - they've attracted 100 million plus users, but most of them don't spend much time on the site if the statistics are to be believed. I'm not at all convinced they are the Facebook killer, they just don't have the 'cool factor', but you can't rule them out either.

2. Creative Destruction & the Rapid Pace of Change

The internet, and the wider information technology sector, is the fastest growing and most changing of all areas of the global economy. A year is a long time in the internet, and anything can happen. If Facebook doesn't keep pace with that change, then they will be left behind, as so many companies have before them. A good example of a company so nearly left behind was Microsoft in the late 1990s. At the time it was the undisputed king of the information revolution, but it failed to see the importance of the internet until it was almost too late. It used it's money and it's dominance over the PC software market to muscle its way in, but has (so far) not come close to matching the dizzying heights of success it once scaled. Before that IBM failed to recognise the importance that personal computers and software would have, and missed out on being the dominant company of the information age. More recently, Yahoo was the go to page of the early internet but they were intent on a 'portal strategy', keeping people on their site. Google disrupted that market by quickly and speedily sending people on their way to where they wanted to go. History is full of companies that didn't adapt to change -or didn't even realise there was change - and became a shadow of their former selves.

While no can predict future trends, there is one trend that is already here: Mobile. Many commentators are calling this Facebook's achilles heel: they currently don't have a business model worked out for mobile, and this could be their undoing. A new competitor in the mobile space could potentially swoop in and take a chunk of their business before they know what's hit them. Mobile is one, but there will undoubtedly be more disruptive technologies just around the corner.

3. Fragmention - Many Competitors

The third risk is not that one big competitor will arrive on the scene and steal Facebook's crown in one fell swoop, it is that many different sites will each compete with Facebook in one particular area, and do a lot better. For instance, take games. Facebook has quietly revolutionised the gaming industry (along with companies like Zynga) by practically creating the market for social games. It has got millions of people who didn't really play games before playing games on a daily basis. Another company, perhaps an existing games company or maybe a new entrant could enter the market and create a new social gaming platform that would offer a whole different level of experience. Similarly, other companies could challenge the company in the area of media sharing, keeping in contact with friends, business pages etc. There may come a time when social networking becomes an open system, where people can choose the service they wish, but can still connect with others from different websites and social networks. Facebook's influence in such a world would quickly diminish.

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