Last reports I saw had Facebook at over 200 million active worldwide unique users (and growing) and an estimated $200m-plus in annual revenue in 2008. Pretty kooky to claim it'll be a failure, eh? Let me start by saying that social networking itself is a utility that is not routinely differentiated by any particular protectable intellectual property. It's a utility that demonstrates a better way for the online and mobile web audience at-large to connect with each other. But it's also a utility that ultimately threatens to be its own worst enemy.

The context of Facebook is "social networking." It's all the rage right now-the novelty of connecting or reconnecting, of building your network, of watching the torrent of trivia flow to and from your network of peeps. But ultimately we as people-at least most of us-aren't social networking hobbyists. It isn't one of the "three things" I'd choose to do in my leisure time. But I do ski, mountain bike, camp, fish, and adventure travel. We are pet owners, golfers, mothers and fathers, gardeners, foodies, and a myriad of other passions, hobbies and industries.

Facebook simply cannot be the best at serving each of those niches or mega-niches, and what Facebook offers at its core *will* be offered as well (and likely better) by niche social media programmers. In fact, as frameworks for utilities such as social networking, media sharing, micro-blogging, etc. improve and evolve, and the understanding of how to employ them becomes more pervasive. The "tribe leaders" for those multitude of affinity groups are more and more likely to be classic magazine publishers, narrowcasting cable nets, specialty web destinations or other media companies (old and new) who cater specifically to that niche market.

There is no barrier to, say, a soccer gear company or a soccer magazine to offer to their specialty community of millions of street soccer players an iPhone app that sits side-by-side to the Facebook iPhone app. If the gear company or magazine *gets* social media and how to properly create and program that app for their community, at any given time the soccer lovers will activate the soccer app long before they open Facebook for anything that relates to their passion/hobby of soccer.

Some might say-well, Facebook could just offer "groups functions" to its users. Yep, it could (and does).

Two reasons this is fraught with problems:

(1) "General" is rarely as good as "specific" in engaging an audience, given equal utility.

Generalizing a technology platform to accommodate all the idiosyncrasies that might appear across thousands of affinity groups and their native behaviors isn't easy, and perhaps not possible... at least not likely as doable as a singular entity focused on a singular community; and

(2) Competing directly with trillions of dollars of economic momentum is hard.

Classic media has woken up to social media. Facebook will be competing directly with major media groups (and savvy brand marketers and advertisers) who are now "getting social media" and have awoken to the fact that they should not be intermediated in their relationship with their affinity group communities... and don't have to. Online and mobile web now have achieved primacy as a mechanism to engage humans. Companies who spend the time, money and effort to engage an audience of any kind via other media-print, television, film, radio-are getting better at using that existing relationship and marrying it with a web/wireless engines of engagement that they ultimately lead and influence (I hesitate to say "control" as that would be antithetical to a well-considered social media strategy).

So where does that leave Facebook? In trouble. With depressed CPMs around general social networking "content," the context of which they cannot assure advertisers will be safe or appropriate, and fighting with big media brands who know how to serve large slices of the Facebook audience better than Facebook does. Even potentially fighting with big advertising brands who may have social media aspirations of their own (read: can more cheaply and effectively reach a target affinity group using their own engines of engagement than "buying space on Facebook"). And certainly fending off upstart "next generation" social networking engines, while struggling to keep users who have a very low cost of switching to the next best thing, and that next best thing may indeed be a social nichework led by subject-matter experts.

While it is likely that Facebook will find a viable and scalable business model somewhere within the monthly engagement of 200 million people, its future is anything but certain.

Jim Bannister

Jim Banister is CEO of SpectrumDNA, Inc., and, as a respected social media thought leader, teaches a course titled Entrepreneurship and Innovation in Media Entertainment and Sports at UCLA's Anderson School of Management. This column was originally published on MediaPost. 

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