Forget the outage, Facebook has bigger issues
Facebook (FB) has a lot more to worry about than an outage that shut down Facebook and its Instagram photo-sharing service for about an hour overnight.
The company says a change it made in its configuration systems caused the problem, and it denies a claim by the hacker group, Lizard Squad, that it was responsible.
However, Yahoo Finance’s Jeff Macke says this glitch is nothing. The real issue for Facebook is how to make more money.
“They’ve got bigger fish to fry when it comes to earnings,” he argues. “They’ve got to figure out a plan to continue to keep up with the changes that are happening in the social media space and how to monetize those users.”
Facebook releases its Q4 financial report tomorrow.
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At least one report says Facebook will begin focusing on personalized video advertising that takes advantage of the information it collects about users. Macke says, well, yeah, OK, but…
“This is the problem Facebook has in monetizing,” he points out. “They like the idea of taking what they know about you to come up with compelling video content that you’ll watch and ideally an advertisement will be hooked onto that. The problem is I’m not so sure I want Facebook to know all that information about me.”
Still, he doesn’t think Facebook has to think that hard about how to come up with new ways to make money.
“They’ve got 25-odd percent of the world on Facebook right now,” he notes. “I’m not sure how many roads they have to go in finding new growth. They just have to get more people online and then they can monetize it later.”
Instead, Macke believes Facebook’s big challenge will be in figuring out how to stay on top of the ever-changing ways people prefer to get their information.
“It all speaks to the disintermediation of the media as a whole,” he says. “Mainstream media is going the way of the dodo as everyone turns to social media to figure out what they are going to listen to and what they’re going to watch. Facebook wants a piece of that action, but they have to keep moving very fast to keep up with it.”
And Macke feels that need to stay relevant as the demands of consumers continue to shift will be a never-ending process for Facebook.
“That’s probably going to be their problem for the rest of their lives,” he points out. “That’s not necessarily the worst thing. Microsoft (MSFT), Wal-Mart (WMT), those companies got old, they seemed to have done OK on the way up. That would be a heady problem for Facebook to become such a mainstream thing that it just actually ages gracelessly.”
But Macke adds Facebook will face challenges as it becomes more like those industry giants.
“Facebook is a very well-run company,” he adds. “But the law of big numbers would hit it.”
