Facebook faces a tipping point in its growth strategy

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It was a case of managing expectations during the recent results round-up at Facebook. While revenues whistled past analysts’ predictions by a cool 56%, CFO David Wehner poured some cold water on proceedings.

He said that growth would slow “meaningfully” due to limits on “ad load,” or the number of ads that Facebook can put in front of customers without alienating them. The number of adverts is already at maximum.

At least they acknowledge the problem, and let us hope it is not too late. The more people you talk to about Facebook, the more you find who have already been alienated. People want to see what their friends are doing, not watch a timeline stuffed full of direct marketing messages (or all that political crap).

Video, apparently, is the way forward, and Mark Zuckerberg is now leading a video first strategy. This will, surely, make those endless adverts more irritating, not to mention eat up battery, data usage, memory and patience.

We have, of course, written much about the direct-marketing, spam-like approach of Facebook, whose customers are their advertisers, not the users of the platform.

But, Wehner also pointed out that their investment program for 2017 will increase. Already the company has eaten into the data center market, and – in its latest infrastructure play – is now taking on the communications equipment market, just at the moment when the traditional behemoths such as Ericsson are struggling.

With pockets as deep as Facebook, there are many avenues open to it.

It will, until users begin to find alternatives in numbers, continue to plunder their data, and sell it for, it seems, vast profit. It will take its other children, WhatsApp and Instagram, down the same path.

It might decide to go a little retro and offer an alternative to clogging up timelines with adverts, and offer an advert free zone for a monthly subscription. There are, surely, at least 10% of the nearly 1.8 billion users who would agree to that (with alacrity). And that, at say $5 a month, is not bad pocket money.

The question– as always with Facebook or any other business that has a one-sided business model and knows it – is whether it can find enough revenue from enough of its blue sky projects to replace the revenue that it will, inevitably, lose when its advertisers realize the truth – namely, how little of an advert and how little time an advert needs to be on a screen before it is deemed to have been viewed (Hint: half an advert, one second, two if it is a video).

The investors are beginning to get nervous and are facing the question: can new revenue streams be brought online fast enough?

Let us hope so for the sake of Facebook’s 15,000 plus employees.

Who knows, Facebook may end up as the telecoms equipment vendor of choice.

What, then, will become of Ericsson?

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