Seemingly unassailable in its position as top dog, Facebook dominates the social media pack but there's a lone voice casting doubts on its traffic figures and finances, and suggesting that an IPO this year would be unlikely.
That lone voice is PrivCo, an American company which sells business and financial research reports. It says that Facebook won't float "anytime soon" because visits to the site in the US, its core market, are in decline, threatening its 2012 financials. It's not clear that Facebook actually has any plans for an IPO, but what of the rest of PrivCo's claims?
PrivCo says that Facebook is "already feeling negative impact from new competition from Google+". And indeed, Google+ does look like a credible threat to Facebook. It is growing like a weed, hitting 25 million users worldwide within just four weeks, expanding faster than Facebook, Twitter or MySpace did over the same period. A recent Bloomberg/YouGov surveyshowed that 13 per cent of Americans have signed up for Google+, with 45 per cent of users reading content once a day or more (only Facebook is higher, at 62 per cent), and 46 per cent creating content at least once a week, which is similar Twitter (42 per cent).
Whether Google+ is a threat right now is an issue open for debate, but it certainly will become one if it continues to grow at this rate and can capture enough of people's attention. If Google+'s recently launched games stream can provide enough stickiness, perhaps Facebook should be worried.
Also given as a reason for Facebook's alleged problems is the decline in visits to the site from its core market in the US, as well as in some other key territories. "Repeat U.S. visits have flattened and are in decline" says PrivCo, claiming that Facebook's monthly uniques have been "effectively flat since December of 2010", staying at around the 145 million mark.
This jibes, to some extent, with reports from other sources. WebProNews reported that Facebook lost six million users in the US, 1.52 million in Canada, and saw smaller losses in the UK, Norway and some other countries.
But InsideFacebook took a detailed look at Facebook's US stats and found that they are "growing quickly, or slowly, or falling" depending on which source you use. Its own tracking service found a drop of 5.8 million monthly active users in the US in June, from 155.2 million to 148.4 million, a drop of 3.7 per cent. But figures from comScore, Compete, Google Ad Planner and Quantcast seem to muddy the waters, some showing dips, others rises.
PrivCo's claim that repeat visits from the US flattened in late 2010 is hard to check without access to reliable stats, but it might be true. The population of the US is 307 million, and Facebook's American user base represents just under half that figure. Maybe, in the US, they’ve just run out of people.
This decline in traffic, PrivCo say, is reflected in Zynga's figures: Zynga's active users fell during the year to March 2011, from 67 million to 62 million, down 7.5 per cent year over year. Most of Zynga's usage is on Facebook, which would indicate that Facebook's active userbase is shrinking as well.
Mashable said roughly the same thing in its Zynga IPO analysis:
Zynga is still dependent on Facebook. Zynga gives 30% of its game revenue to Facebook, the same percentage Apple requires for inclusion on the app store. In fact, the word "Facebook" appears more than 200 times in the S1 filing.
Zynga's user base hasn't grown in the last year. This is the stat that will worry investors. The company had 236 million monthly active users in Q1 2010, the exact same mount it had in Q1 2011. It actually had more daily active users in Q1 2010 than Q1 2011.
What does this mean for a possible IPO? PrivCo's Joseph Ranzenbach, VP Operations says:
"Facebook is now facing meaningful competition from a well-funded and viable alternative, Google+. Facebook's last private stock valuation of $80 billion+ may no longer be justified on a risk-adjusted basis. Given that private companies rarely approve private-stock transactions at a decline in value, a virtual freeze on Facebook's private stock sales for the next two quarters of 2011 is possible."
Is PrivCo's pessimism about Facebook justified? Maybe. We've seen predictions of massive Facebook backlashes before, but they never seem to materialise. Despite Facebook's shocking attitude towards their users' privacy and data, people still log on and the site is still growing strongly overall.
Business Insider seem a bit suspicious of PrivCo, wondering if they have drummed up a contrarian position in order to gain attention for their report sales business. If that's the case, it's a risky tactic. Going public with a story that turns out to be codswallop can undermine a start-up's position just as quickly as the media attention bolstered it.
So, what do you think? Is PrivCo's analysis correct? Is this the beginning of Facebook's decline? Or are rumours of its impending demise premature?