Facebook shows signs of maturity as user growth tapers off

facebook now worth 40 percent less 11 days after ipo

Is Facebook maturing? By some measures, yes. According to comScore (as cited by the Wall Street Journal), Facebook’s growth has been leveling off. Between April 2011 and April 2012, Facebook has increased in unique visitors by just 5 percent, a far cry from its double digit percentages in 2010 and 2011. Having secured 221 million U.S. users, or 71 percent of the American market share of Internet users, Facebook has already captured the majority of the market and the plateau was inevitable.

As expected, despite users spending over six hours per month on Facebook, the rate of engagement has been slowing down. To put this into perspective, the growth rate of hours spent on Facebook between 2009 and 2010 was 57 percent, and increased by 23 percent during year after. Between 2011 and 2012, users spent 16 percent more time on Facebook.

If user acquisition continues to be in Facebook’s best interest, it must turn its attention to growing its international presence. According to comScore, in 2011 Facebook raked in $3.1 billion in ad revenue, with 56 percent of the revenue being accounted for by U.S. businesses. This percentage is projected to decrease to 51 percent in 2012, according to eMarketer.

If Facebook pursues an international expansion, it has a long road ahead of it. Competing social networks have already established a foothold in major countries. For example, Cyworld has been the long-time social network of choice in South Korea; RenRen, a former Facebook copy, is the top social network in China; VKontakte is the predominant social network in Russia, and recently delayed its IPO due to Facebook’s poor Nasdaq performance. 

As of June 11, Facebook stands at $27.55 per share, with a market cap (valuation) of $58.9 billion.

Knowing the difficulties it faces with international growth, Facebook may focus on its vertical growth by optimizing its advertising services to reach existing users, in lieu of simply acquiring more users. The company does has much room for improvement: A recent Reuters study reported that four out of five Facebook users have never been influenced to purchase or use a service advertised on Facebook.

Facebook’s foundation for horizontal growth will be in its mobile efforts. The number of Facebook mobile users grew from 425 million users in December 2011 to 488 million users, but the company faces an uphill battle in determining just how to monetize from the advertisers choosing to advertise on Facebook’s mobile platform. Facebook has a few things to learn from its competitor, Twitter, which has established a profitable mobile advertising strategy.

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