Is Facebook able to Maintain its Leadership in Social Network?

Nowadays, when people start to know others, mostly they ask to add others on Facebook so as to build friendship. Meanwhile, people share their moments of life with words, photos or videos to their friends and follow their friends’ daily life to know more about them. It is clear that Facebook is making great impact on people’s online social life. The founder of Facebook, Mark Zuckerberg did not expect the prevalence of Facebook when he firstly aimed to build a website for interaction among students in Harvard University in 2004.

The research from We Are Social reflects that Facebook gains most active users on social platform in the world with the number of 1,366 million in 2015.

In the light of the announcement of Facebook, Facebook keeps making progress in the growth of revenue for each quarter. However, the growth rate is decreasing gradually, ranging from 82% in Q1, 2014 to 42% in Q1, 2015, implicating that the popularity of Facebook starts to stagnate due to external and internal forces. The problem that if Facebook can maintain its leadership in social network is hard to avoid.

Twitter, Youtube and other popular software are the strong existing competitors to Facebook since they also make up major market share in the industry. It is shown that Youtube, following Facebook, accounts for 56.4% downloads in US market and Twitter earns 22.7% users, according to the data from comScore. The downloads of Facebook get reduction from 75.7% to 71.2%, indicating that the fierce competition in the market erodes the market share of Facebook.

In addition, the rivalry from new entrants like Snapchat, Line and Tumblr, make the road for Facebook to continue to be the market leader even harder. The chart from BI Intelligence shows that Snapchat and Tumblr, these two new entrants are much more preferable among younger generation in the U.S. Up to 71% users aged from 18 to 34 prefer to use Snapchat, while the average age users of Facebook is about 40. Snapchat outperforms Facebook among young people is because of its privacy. Users are allowed to send posts which are only shown to their friends rather than strangers and each post has its own time limit, since it won’t last for more than 10 seconds. It is suitable for the youth, who want to share their lives with friends but are concern about their privacy at the same time. 

Emarketer points out that people aged from 18-34 in the U.S. are active social network users. Hence, gaining favor from these active users is essential to the development of a company. Facebook does not do well in attracting younger generation in recent years. That is the major reason that Facebook tried to acquire Snapchat and then create Poke and Slingshot to imitate Snapchat after the failure of acquisition. But the imitation is defeated by Snapchat, it raises difficulty for Facebook to dominate the market in the future.

Since there are more and more choices available today, the bargaining power of buyers are getting stronger. People require easy-functioned and ad-free high quality social network. They want to share their lives in a convenient and safe way with their friends. Social platforms need to meet the demand of consumers so as to drive the traffic.

Under the pressure from external forces and internal problems, Facebook has to retain current users and increase customer satisfaction by solving the problems of information explosion and privacy concern. And in order to attract more new consumers to make up more market share, Facebook needs to create new factors that other social networks are lack of.

Facebook now is the market leader in social networks, but the fierce competition from existing competitors and new entrants as well as the stronger bargaining power of buyers threaten its leadership. If Facebook is capable to find new ways to monopolize the market, it is a question to be found out.