Today’s, not unexpected, news that Facebook is looking to introduce an array of applications which will mimic Snapchat will cause some concern within the social media investment arena. More and more we are seeing social media giants such as Facebook and Twitter using their enormous membership numbers to introduce services similar to those offered by their competitors. When you bear in mind Twitter is a valued at $12 billion, Facebook at a staggering $385 billion and Snapchat around the $20 billion mark, there is some serious money in these companies.
Is competition too intense?
While Facebook is head and shoulders above any other social media website it too faces its own challenges. The company needs to make bigger and bigger investments and take larger and larger risks to make any difference to its headline figures. Then you have the likes of Twitter and Snapchat for example who are still valued in the billions of dollars but yet to make any real headway into profitability.
The fact that Facebook is looking to mimic the services offered by Snapchat would seem to indicate Facebook feels under some kind of pressure. So, what does the future hold for social media websites and could it all implode at some point?
Monetising sites tomorrow
While Facebook has made some inroads into monetising desktop and mobile Facebook services it has been extremely slow going. The likes of Twitter and Snapchat may find it challenging but then again they could learn from mistakes made by Facebook. At this moment in time it is really a case of jam tomorrow for social media websites who have hundreds of millions of members but how many are really active? How many will actually click on adverts and buy services?
One of the main problems is that people visit their social media accounts to socialise – on the whole they do not visit social media sites to click on adverts and buy products/services. So there does seem to be a fundamental issue here which needs to be addressed as soon as possible. The longer this issue goes on, a case of jam tomorrow, the more impatient investors will grow which will have an impact upon share prices at some point.
How dominant can Facebook become?
There is no doubt that Facebook is head and shoulders above any other social media channel available today. This is a company which keeps on growing, introduces new services and has seen some success in monetising its massive membership base. Surely there will come a point when Facebook comes under even more intense pressure from:-
Regulators – how much control can one company have in the social media sector?
Competitors – competitors are already emerging offering higher quality specific services which may or may not be available through Facebook.
Historically Facebook has simply bought any company which it sees as a major threat such as WhatsApp. However, the vast majority of these companies are loss-making and while they could make money in the future, what is their profit potential, how long will it take and how much effort to get there?
Conclusion
While Facebook is head and shoulders above any other social media channel there seems to be a trend emerging where different companies try to mimic the services of their competitors. We have areas of Facebook morphing into the likes of Snapchat while Twitter recently extended the maximum length of messages. There are hundreds of billions of dollars tied up in the social media sector with only a limited number of active members. Will the sector as a whole learn to better monetise membership numbers? How long will investors show faith in loss-making companies? Are the major social media companies in danger of cannibalising each other’s membership bases?