Warning Bells Are Sounding Ever Louder For Facebook's Long-Term Future

It was mere conjecture before. How could Facebook (FB), the largest social networking site in the world, fail? "Naysayers and doom-mongers, that's what they are." Repeating the same kind of mantra - not innovative enough, good at everything but not great at any one thing, doomed to fail amid the rise of newcomers such as Snapchat, Vine and Whatsapp. It was all very good dismissing such attacks on Facebook's outlook before. It often seemed in some corners that the very thought of being so negative, so pessimistic about the Zuckerberg juggernaut, was almost sacrilegious. But now, Facebook bears can feel vindicated as the long-term prospects for the social networking site have just taken a considerable hit.

Teenagers Are Leaving Facebook "In Droves"

A European Union-funded study has found that increasing numbers of teenagers aged 16-18 are turning away from Facebook and instead using services including Flickr, Snapchat, Twitter (TWTR), and its video sharing app, Vine. Snapchat, a relative newcomer, is already in use by "10% of teens globally." Between the first and second quarters of 2013, Twitter's Vine service saw teenage use grow by a whopping 639%. The head of the study, Daniel Miller, a professor at University College London, stated that 2013 is highly likely to be the year when "a sustained decline" of the site's fortunes began. He goes on to say that "Facebook is not just on the slide - it is basically dead and buried."

Reasons

According to the study, one of the main reasons for the teenage migration from Facebook is the increasing presence of their parents on the site. Receiving the dreaded friend request from their parents is pushing teenagers onto other platforms where their parents cannot see what their kids are up to. Not only that, another teenage gripe is that it is simply "not cool" to be connected to their parents via Facebook. So Facebook's very own Instagram, Snapchat, Twitter and others are increasingly used, even though many of the platforms are much more linear in their services than Facebook. Teenagers don't seem to care about this point, according to the European Union-funded study.

Facebook is struggling to compete via mobile platform. It's simply quicker and easier to use Whatsapp, Snapchat, and even Facebook Messenger via mobile than it is to log into Facebook to send a message or have a conversation. With such a glut of alternative options for users, it will prove increasingly difficult for Facebook to hang on to its crown.

Facebook has made one huge error. It hasn't really paid the attention it should have to how it rose, and how its initial competitors were swatted aside while it grew exponentially. MySpace, Bebo and MSN Messenger were all at one point seen as the new way to communicate, the stylish platform to be seen using. Then Facebook came along and obliterated them. It was the new, cool platform to use, but it has probably now plateaued.

Now Facebook is in real danger, surely more real than ever before, and Mark Zuckerberg faces possibly the biggest challenge of his undisputed reign over the social networking spectrum. A focus on mobile and a potential rebranding in order to pull in teenagers and disaffected users in general are fundamental if Facebook has any chance to defy the odds and the doom-mongers. Either way, the long-term outlook for Facebook is certainly tentative, and the stock has become a significantly more volatile proposition, something I predicted earlier this year.

Source: Warning Bells Are Sounding Ever Louder For Facebook's Long-Term Future

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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