Editor’s note: This article was first published in January 2014; Facebook’s $138 billion market capitalisation, its P/E of 118, the upcoming 29 January results and the description of Google+ as the fastest-growing network reflect that time. Facebook bought WhatsApp in February 2014, and Google shut down consumer Google+ in 2019.
In five days (29 January 2014), Facebook will report its results, which will probably trigger a sharp move in the social network’s share price. Whether that move will be up or down we don’t know yet, although at first glance we would expect results that will satisfy investors’ short-termism.
However, this will probably be the last time we see results from the social network that live up to investors’ expectations. Facebook’s market capitalisation is $138 billion, with a P/E ratio of 118, which reflects the high hopes investors have placed in the growth of the company’s revenue.
It will be very hard for Facebook to keep investors happy in future earnings reports. The pace of revenue growth it would need to keep delivering to justify its valuation is very unlikely to materialise, given that growth in the social network, and interest in it, is starting to slow.
If we add new reports and doubts now starting to come to light to Victoria Bernal’s explanation of her doubts about the company, it looks as if Facebook has already peaked. On top of that, users are spreading themselves across other platforms as they look for new alternatives in social networking. Right now, the social network growing fastest in number of users (though not yet in active users) would be Google+.
In short, while Twitter, LinkedIn and Google+, as well as Instagram (owned by Facebook), Pinterest and even WhatsApp, are showing rising interest and growth, interest in Facebook is clearly heading down.
If Facebook does not diversify its business beyond the social network, within two or three years it could suffer the same fate as MySpace, a company that was once the be-all and end-all of social networks.
See also: Before Facebook and Twitter, the future was TheGlobe.com
Featured image: Sam Michel, CC BY 2.0, via Flickr.
