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3 Things That Could Kill Facebook

Facebook's success as a public company is anything but guaranteed.
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Let the Facebook road show—and the dissection of its future as a public company—begin.

In The Age of the Platform, I write extensively about how platforms by themselves guarantee nothing. Think about how companies like AOL, MySpace, and Yahoo! have fallen from grace in recent years. And I'm hardly the only one who feels this way. Eric Jackson on Forbes makes the case that Google and Facebook might suffer similar fates within five years. Is it possible? Sure. Though I suspect it won't happen, primarily because these companies understand Clayton's Christensen's innovator's dilemma: in a nutshell, the very things that make a company successful ultimately cause its demise.

Even so, let's examine Facebook and the forces that could derail this 900-million-member social network. At a high level, there are three: Facebook itself, the competition, and the unknown.

What Facebook Does

Facebook 2.0 has already launched. Its access to capital means that it can buy patents and photo-sharing apps for more than $1.5 billion in less than a month. Bigger deals come with greater rewards, but also with greater risks. Instagram represents a significant amount of the company's cash stash and, at a minimum, may impede its ability to do other deals.

Next, while going public means that it will have greater funds at Facebook's disposal, there's a flip side to that coin as well. Many of the company's financial practices will be revealed. Note that "many" isn't the same as "all." Amazon.com has proven that no company has to break out earnings by every product, service, or category.

The IPO invites the following questions:

  • What if fickle investors don't like what Facebook is doing–or how the company is doing it?
  • What if governments start investigations its into privacy and security practices?
  • What if Facebook drops the ball and a massive security or privacy breach ensues?
  • What if more and more users just don't like how their data is being used?

And let's not forget potential overreaching (read: organ donation) and whether the company can monetize for mobile devices.

What Its Competition Does

No company exists in a bubble or vacuum—and that's never been more true than today. Books like The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers demonstrate the danger when companies only look inward.

More than ever, flawless strategy and execution (if there were such things) by themselves guarantee nothing. Perhaps Amazon, Apple, Twitter, Google, or another heavyweight will crush Facebook. Maybe a new social network, one not based upon personal connections, will supplant Facebook as the 800-lb. gorilla. The Experience Project is one of a slew of networks organized around a fundamentally different concept.

And I could write a book about the impacts of luck and timing on the success of any company.

The Unknown

As I write this, I have no doubt that somewhere around the globe someone is working on an idea that will cause major disruption. Never has it been easier and less expensive to start a company. The barriers to entry have all but evaporated and, given how quickly things change these days, I can certainly see a day in which Facebook is no longer "hip."

Will Facebook be relevant in five years? Probably, but the company isn't aiming to be just relevant. It wants to be dominant and, on that, I'm much less certain.

Last updated: May 7, 2012

PHIL SIMON | Columnist | Author and tech consultant

Phil Simon is a frequent keynote speaker and recognized technology expert. He is the award-winning author of six management books, including The Visual Organization: Data Visualization, Big Data, and the Quest for Better Decisions.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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