It’s was the subject of corny jokes a few years ago: “Facebook, this thing is gonna be huge.” But as the social network surpassed Friendster and Myspace to become the social network, the question has always lingered: is there anything inherently special about Facebook that makes its critical mass indispensable, or is it at its core a fad that will be replaced by the next flavor of the month?
Facbeook gets ready to drop one of the biggest IPOs in history on Friday—possibly the biggest ever. The company is expected to raise nearly $10 billion in cash by the end of the day, with its value supposedly set as high as $90-$100 billion—about the same size as Pepsi or McDonald’s.
But while investors may be chomping at the bit to finally get their hands on those coveted Facebook shares, a new poll from Associated Press and CNBC shows that Facebook’s users are more wary: 50% of Americans think that Facebook is a passing fad that could easily go the way of Myspace. Even more troubling for the company, 59% of American users say they do not trust the company to keep its information private, and wouldn’t use it for financial transactions like online shopping.
This is worrisome for Facebook because it plans on expanding into e-commerce sales, and because it relies on user loyalty for its existence—user loyalty is its whole game.
A relationship in which users trust Facebook to safeguard personal information while the company makes money by selling access to that information is way more volatile than the relationship between, say, Pepsi and its customers. The potential for backlash is huge.
Plus, the costs required for an internet competitor to grow popular and eat Facebook’s lunch is practically nothing compared to the production costs required for a company to threaten Pepsi or McDonald’s.
That said, Google has been trying for years to knock Facebook off its pedestal by introducing its own social networks, most recently with Google Plus, and hasn’t succeeded. Some users talk a big game about leaving Facebook, and every once in a while a new one like Path or Diaspora will make some noise and threaten to become the “next big thing.” But often times those networks have their own distrust controversies, and Facebook’s growth doesn’t seem to be slowing. It’s on track to hit 1 billion users this summer, and is estimated to have made $1 billion in its first quarter of 2012—its biggest quarter yet.
Despite what the polls say, when it comes valuing Facebook investors will probably reflect what users do, not what they say.