How Much Does Facebook’s UK Setback Really Matter?

With more than 800 mn users, you’d think Facebook could suffer a little setback in the UK, right? According to the latest from Forbes, it might mean that there are bigger problems waiting to arise. Facebook has lost market share in the social networking space in the UK, and usage has dropped more than 7 per cent in the past year. To Tim Worstall at Forbes, this smacks of saturation. He adds that this ‘may or may not be representative of other markets.’

Facebook’s UK losses are wins for a range of other sites, including YouTube, Twitter and Yahoo! Answers. Google+ didn’t make the top 10 in this case. While Facebook is still dominant, especially relative to Twitter and Yahoo! Answers, it does point to vulnerability, and it’s worth remembering that MySpace was once vulnerable, too.

On a global basis, Google+ continues to grow, as does Twitter. Twitter, in fact, is adding more and more features that put it in direct competition with Facebook, both for users and advertising dollars. As far as the latter is concerned, Twitter is poised to become a much more formidable opponent for Facebook than it has been.

If Facebook already peaked, there’s little the company can do about it now. The IPO will move forward, as everyone expects. But, the valuation and investor interest may be affected. At this stage of the game, Facebook’s best move would be to implement a more effective advertising platform, which would help it generate more revenue, protect its current revenue base from Twitter and distract attention from the risks associated with market saturation. Also, it could be helpful to put out a new blockbuster feature (sorry, from what I’ve seen of Timeline, I don’t think it’s the answer).

I wrote quite a bit earlier about what a Facebook/Zynga acquisition would look like. While it would be a nightmare for Facebook to execute, and consume a hefty amount of capital, it might provide more alternatives for the social media platform to engage with its audience, something it could use right now (it would also provide more flexible advertising alternatives to clients).

Facebook is headed to an IPO. Now, it needs to figure out how to get as much out of it as possible. If the company has peaked, it needs to shift its operation to that of a mature company.

Click here for FREE email alerts from Inside IPO >>

Source: Forbes