Facebook waning

Growth stalls with diminishing interest from corporate clients

By Kim Yoo-chul

The information and technology (IT) market is a competitive, highly volatile place where adaptability to changes is the key to survival. Late responses mean imminent blowback.

Former handset giant Nokia fell in the market after it failed to accept the industry’s new wave of mobile platforms ignited by Android and iOS. Yahoo also is no longer a major Web search company as it failed to catch up with Google.

Now, the world’s biggest social networking service (SNS) firm Facebook with more than 1 billion clients has seen a steep fall in its stock price, and concerns are growing that it will eventually be phased out in Korea.

``Facebook is resisting changes. If it sticks to its current business model, then the destiny of the service will be exactly the same as Nokia and Yahoo in the next four years,’’ said an official from the Korea Software Industry Association (KSIA) by telephone.

The remarks echoed the grueling business momentum of the SNS service in the United States. Facebook shares, which fell to a record low after insiders could sell stakes for the first time following an initial public offering (IPO), will face more pressure when another 1.44 billion shares are freed up through November this year.

Its CEO Mark Zuckerberg admitted that he was facing higher investor concerns about how Facecbook could generate more revenue from its growing user base. And this is what is exactly happening in Korea.

Since late last year, the usage rate of Facebook has drastically fallen, according to a recent analysis by Nielsen KoreanClick, which provides in-depth analysis of website and applications use.

The number of net visitors reached a historical monthly high of 12 million only last December; but Facebook has failed to add visitors since then. PageViews rose to some 1.6 billion in May last year, however, no significant increases were seen afterward, Nielsen KoreanClick data showed.

``This is the right analysis that strengthens views that the U.S.-based SNS service is facing its biggest challenge whether to further grow its business or to fold up,’’ said the KSIA official.

The situation is not much different in other Web-wired East Asian nations such as Japan and China because analysts say Facebook's business model is heavily dependent upon general users not big private companies and opinion leaders.

``That’s why investors were worrying about the fundamentals. This is a real question that’s been squeezing Facebook,’’ said a senior fund manager from a Europe-based investment bank, who recently cut its position on Facebook, asking not to be identified as he wasn’t authorized to speak to the media.

At least in Korea, it’s unlikely that Facebook will find a breakthrough as the use rate on mobile devices ``isn’t impressive’’ hit by the rise of free-messaging service Kakao Talk.

Nielsen KoreanClick said the number of net visitors for Facebook via mobile phones remained between 5 and 6 million, lagging behind Kakao, which gets between 12 and 13 million.

``For those reasons, Facebook headquarters has no interests investing more in Korea because the country isn’t likely to bring the profits it wants,’’ said an official from the Korea Internet and Security Agency (KISA) by telephone, adding the stalling business in Korea will give a chance to start-up SNS providers, here.

Market analysts have a ``buy’’ rating for stocks of local SNS providers or related companies as they are generating revenue, steadily, in contrast to Facebook; and their financial soundness looks more stable.

Another factor that is sapping the appetite for Facebook stocks is the rises of new types of SNS pushed by major consumer electronics companies such as Samsung and LG Electronics.

Samsung is putting more resources on strengthening its own SNS platforms for use in its Web-connected TVs, tablets as well as smartphones and cameras.

LG Electronics, as well as Sony of Japan and other software companies Google, Microsoft and Apple are busy updating their own SNS to seek a bigger stake in new ecosystems, which what market analysts and officials say is a ``negative factor’’ for Facebook.

Samsung plans to introduce a Facebook competitor dubbed Samsung Facebook. After the report, Samsung later released its official statement that the Korean firm is only interested in updating its Family Story branded services.

``Apple survived as it changed its business model to mobile devices from a conventional computer supplier. Without changes, then there will be no Facebook in the near future,’’ said the KISA official.

Facebook officials in Korea declined to give any comment citing the sensitivity of the matter.