Facebook Users May be Doing an 'About Face' - New Numbers Raise Concerns

By Peter Bernstein June 27, 2012

Facebook has been having its problems since its recent IPO, and a recent report by Internet tracking firm, comScore is not about to make life any easier. New numbers about Facebook’s number of unique visitors for the past few months show little growth. This is unwanted news for Facebook and investors, who were looking at the company’s valuation as being justified based on the prospect that growth in visitors and time spent on the site looked rosy. Not so, at least in the all important U.S. market.

In your face

According to comScore, Facebook's U.S. user numbers dwindled in May from April and March. In May, Facebook attracted 158.01 million unique U.S. visitors. This represents a slight decline from the 158.69 million in April and 158.93 million in March. Users spent an average of 380.8 minutes, or more than six hours, on the site in May this year, up slightly from 378.9 minutes in April.

It should be noted that comScore changed how it counts users not that long ago which makes comparisons problematic. For example, under the old way of counting, Facebook had 157.22 million visitors in May 2011, which would make the latest year-on-year increase of just 0.5 percent.

The issue for Facebook is not about quibbling over the precise numbers but about the trend. Reality is that no matter the method used to compute unique users, growth is leveling off. When you throw on top of this the fact that more people are accessing the popular social media site via smartphones and tablets where users have shown distaste for receiving paid advertising, there is clearly trouble brewing.

There has been a lot of pundit speculation recently as to whether Facebook can be knocked from its respective dominance of both the unique visitors as well as time spent metrics where they have enjoyed seemingly unassailable positions. While these numbers really are only indicators, what they do indicate is possible user fatigue with the service, and long-term that is a huge challenge since the Facebook business model is driven by its reach (shear number of eyeballs) and time spent (the better to have a chance to sell you something). If advertisers start thinking there is a better way to reach their coveted audiences, including in contexts that are more transactional friendly, Facebook is going to face difficult times raising ad rates. 

One way Facebook is trying to grow its base and keep people on their site and away from others is the continuous rollout of new features and the acquisition of poplar photo-sharing site Instagram and facial recognition Face.com. The problem is that the only resource nobody can produce more of is time. As we are all aware, in the online world time really does equal money. 

Google and others get it. That is why things like Google+, Google Offers and a raft of new features from the search engine giant keep rolling out and why the expected Google push into interactive television and their intense concentration on advertisers to take advantage of YouTube are important in the war for occupying more of our time. It is also why both Google and Facebook rightfully fear the explosion of mobile apps. I will admit that I play “Words With Friends” on Facebook via my PC, but my platform of preference for playing is the app on my smartphone. My wife likes playing on her Kindle. 

The point is that every minute I am not on Facebook is a minute I am looking at ads through the app. This does not mean as many are predicting mostly to make headlines that apps are going to kill search and social media. What it does mean is that no markets or companies can grow at explosive rates forever.   Indeed, the real test of management of fast-growing companies is how well they adjust to changing market realities. The comScore numbers in that respect are important food for thought. 

Edited by Brooke Neuman
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