Does Facebook Run the Risk of Gradually Getting Cannibalized?
Facebook recently mentioned in its earnings report that teenagers are leaving Facebook. The popular reasons for leaving include teens not wanting to be on the same social media platform as their parents, the perception that Facebook requires more time to post and read, and their preference toward images and videos.
This development is a reason for Facebook to worry. So what's really going wrong with Facebook?
Broadly, Facebook's users can be divided into two categories—those who access it via a desktop and those who access it via a mobile device. Facebook more or less retains its monopoly of desktop users for meeting their social networking needs, but retaining mobile users poses a real challenge. As mentioned in an Entrepreneur article,
On the phone, it's easy to hit the home button, then open a new app, like WhatsApp, Snapchat, or Instagram...Want to just see photos from friends? Go to Instagram, or Snapchat. Want to just exchange messages with friends? WhatsApp, or Snapchat work. Want to play games? Candy Crush, Angry Birds, QuizUp, or whatever you want are available.
Though Facebook is still a monolithic application, it now suddenly sees competition from relatively newer players. In the book Product Strategy for High Technology Companies:Accelerating Your Business to Web Speed, Michael McGrath says:
Cannibalization is a recurring strategic issue for high-technology companies, caused by emerging technology that drives them to continuously upgrade and replace existing products. Cannibalization occurs when new a product replaces an existing product.
A good example of cannibalization is from the world of customer relationship management applications. When Salesforce.com created a software-as-a-service cloud offering for its customers, more established players like Siebel failed to recognize the importance of this event and ignored Salesforce.com's move—thereby running the risk of getting cannibalized by a relatively small player at the time.
Despite its privacy moves, Facebook is often perceived as a social networking site where what people write will be on the site forever. In some ways, this is a perception issue, and private communication is something the relatively newer players—such as Snapchat, WhatsApp, etc.—are able to cash in on.
It can be argued that Facebook is running the risk of getting cannibalized by newer competitors who are smart enough not to take Facebook head on—given its humungous size—but instead they are attacking it feature by feature.
McGrath goes on to say, "This strategy of attacking the market leader with new technology while the leader is trying to hold on to the old technology is common in high-technology industries."
It appears that Facebook is not content with holding on to its position and the technology. And this is evident from their acquisition of Instagram and their attempt to acquire Snapchat. The probable need of the hour for Facebook is to invent an alternate social media while making use of its enormous user base. Whether Facebook wins or gets cannibalized will be an interesting battle to watch.