Maybe itâ€™s because of summer holidays in the Northern Hemisphere, but there seems to be a common malaise among the bigger digital service providers (DSPs) just now. Is it that they are just clearing the decks of bad news before the silly season starts in September, usually a time of new product announcements and renewed investment interest?
It all started with the demise of opening share prices for that wunderkind of social networking, Facebook, or should I say, Facebook Inc. ItÂ reported a drastic slowdown in revenue growthÂ and failed to offer financial forecasts to quell fears about its ability to boost advertising growth, sending its shares plummeting. Facebook has shed a third of its value since its haphazard May debut at $38, to below $21 today.
Hardly surprising with an opening valuation of more than 50 times earnings, and no proof of any longer-term ability to sustain growth with users migrating to mobile devices. Facebook grew inherently because it was everything but the big commercial entity it must now become. Social networking is not â€˜commercial networkingâ€™ and while Facebook was under the control of one successful, if conniving, individual it maintained its level of innocence and simplicity that people like and trust.
Now that is has become a corporate giant, having to perform at the whim of hapless investors, it has lost its mantle of â€˜socialnessâ€™ and any attempts to over-commercialize it will likely see those coveted members flee to less imposing sites for their networking fix. Remember MySpace?
Now that Facebook is an â€˜Incâ€™ it has to be a little more forthcoming with information about its true position. In its Q1 filings it disclosed that itÂ had 83 million members that were fake, representing around 8.7% of the total. How many of the remaining 872 million are actually active remains a mystery and how many of those will happily generate revenue for Facebook, even less obvious.
One news storyÂ implying that not joining Facebook could be a sign you are a potential psychopath may help boost the numbers, but numbers alone donâ€™t carry the clout they used to. What good is any website, social networking or otherwise, that has big numbers but is unable to generate revenues. After all, the two are no longer inexplicably linked.
And DSPs are not getting it all their own way, as Google illustrates. More Google â€˜initiativesâ€™ will soon disappear and there are a of string rumors the much-vaunted Facebook challenger, Google+, is not going as planned and thatÂ Google has put a stop to all acquisitionsÂ related to it, at least until year end. The Google â€˜build it and they will comeâ€™ methodology is bold and entrepreneurial, but it has its downside.
As TechCrunch reported, Google is shutting down three products, as well as a number of company blogs that had become redundant or just werenâ€™t updated very frequently. The products include Google Apps for Teams, Google Listen and Google Video For Business.Â This round of shutdowns comes just a few weeks after Google alsoÂ closed relatively popular services like iGoogle and Google Video. As you would expect from any business venture, if something is not working or costing more than it generates, you can it.
Thatâ€™s all well and good, but DSPs like Google, make a habit of launching products and services that people use and often become dependant on. If it happens more than once they tend to lose faith in the supplier and move elsewhere. While the decisions may be sound economically, the repercussions may be costly in other areas.
While the stock market may be critical of CSPs’ lack of innovation and static share prices it may also like to take a second look at the high-flying DSP world and decide if it offers a better investment option. Will Facebook be around in 10 years? Who knows? Will AT&T be around in 10 years? Highly likely! I rest my case.
First published at TM Forum asÂ The Insider, 8 August 2012