On May 18, Facebook shares started trading on the NASDAQ stock exchange in Times Square.

The End of Facebook?

With the emergence of apps and a transition away from websites, Facebook may fall by the wayside

BY Kenneth Rapoza

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A third generation of Internet companies is unfolding now, stepping away from the Web completely and moving toward standalone "apps." Websites are an afterthought for them. But websites are in Facebook's DNA.

Every day on my Forbes.com dashboard, I see hundreds of hits from visitors who have found me via links from Facebook. In the online media business, links are eyeballs, as good as cash. To reporters and media outlets clamoring for attention, Facebook links are as important as the coveted Nielsen ratings are to mainstream broadcasters.

I challenge readers to find me a single top-rated media outlet without a Facebook presence. News programs like Dateline NBC have their own Facebook page. Huffington Post, of course, does. Reality shows like The Voice all interact and keep the buzz going about themselves and their content through Facebook, 24/7. Nothing else on the Internet compares.

Big Media loves Facebook. Not even Storify, a website that helps users create “social news” stories, comes close.

Web-based companies have been around for nearly 17 years now. Starting with the big boys like Yahoo and Lycos (remember them?) all the way to the second generation of social networks such as Friendster, Google Orkut, MySpace and–still standing–Facebook. Dozens of splinter groups have formed, from Twitter to the nichey networking services like LinkedIn.
 A third generation of Internet companies is unfolding now, stepping away from the Web completely and moving toward standalone “apps.” Websites are an afterthought for them. But websites are in Facebook's DNA, and unless you're an evil scientist working for a government intelligence service, you can't change your cell structure.

The media's old Fifth Estate has been in foreclosure for some time. The news industry, especially print, has been in a recession since the bursting of the dot-com bubble. So it is actually a little sad that media are holding on to a social network brand, the biggest in the lot, that's floating around in an ever-deflating, overpopulated bubble of spin-off services and apps. Call it the social networking/app bubble.

“Look at Yahoo,” says Eric Jackson, an investment professional based in Naples, Fla. He runs Ironfire Capital, a hedge fund. He is also a tech company leadership guru who writes a lot about this subject for Forbes. “[Yahoo is] worth about 10 percent what it was in their heyday. There was a lot of hype that drove up the value of Facebook in everybody's eyes: the markets, the consumers and the press. But Facebook is likely to face a similar fate as Yahoo.”

Jackson's April article about why Facebook might be completely gone in five years got quite the response. Look at it this way: 985,616 views. 


Ever since Facebook's May 18 public stock offering, the financial press and their investor sources have been working on its obituary. Like the media business, Facebook thrives on advertising, and enormous pressure is on it to make money now that it's public. The company might experiment, for example, with sponsored stories–advertorials by companies (including media)–who use the site in a pay-for-play capacity. And “there's still potential for paid search and other types of payment systems on Facebook,” says Jackson. 
But while Facebook's first-ever quarterly earnings result met Wall Street's declining expectations, that wasn't enough to keep investors from dumping the stock. Facebook shares dropped 10 percent in after-hours trading July 26, meaning the stock was down more than 19 percent in one day, more than 29 percent since inception. To be sure, Facebook has billions of dollars at the ready. That's probably why Jackson gives it five more years.

Of course, without Facebook, an ever-frustrated media will have to find some other way to engage readers. According to Jo Ellen Green Kaiser, executive director of The Media Consortium–a network of independent journalism organizations–it is easier to build donor lists from people who “like” you on Facebook than any other method.

“We don't have anything that would replace that if Facebook falls,” she says.

In the world of creative destruction, something else will inevitably take Facebook's place. News organizations will still have to stay on top of things, know where they are getting their traffic flow, and make sure that their content is accessible to the companies doing the best job at distributing the news.

Suggestion for Twitter, though: Stay private.

 

 

This reporting is supported by The Media Consortium.


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A longtime reporter and foreign correspondent for Dow Jones and the Wall Street Journal, Kenneth Rapoza is an In These Times columnist who writes about the news business. His work has also appeared in The American Prospect, The Nation and at Salon.com. He can be reached at ken@inthesetimes.com.

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