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Facebook Era: Is the End of Its Dominance Near?

3/23/2012

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It's starting to look like the beginning of the end. Signs are appearing, here and there, that suggest the dominance of Facebook in the public imagination and the widespread obsession in popular culture with all things Facebook may by waning, oddly enough, even before it launches its initial public offering later this spring. A recent New York Times story about a new social website called Pinterest suggests some reasons why.

Pinterest's express goal is similar to Facebook's but with a twist. Pinterest intends to "connect everyone in the world through the 'things' they find interesting." It declares itself a "virtual pinboard," which allows users to place pictures of objects they like and organize them. Others can view them and copy them for their own uses. Interest categories include food and recipes, wedding planning, garden styles, and just about anything else you can think of. Piniterest at once both leverages Facebook and has certain advantages over the Facebook model. It uses a "tie-in" with Facebook, so that each time a user signs up, the Pinterest website automatically "follows" all of that users Facebook friends who are also members of Pinterest, sending them email notifications of the new enrollee.

The new website also distinguishes itself from Facebook by expressly discouraging self-promotion: "If there is a photo or porject you're proud of, pin away! However, try not to use Pinterest purely as a tool for self-promotion."  Take that, Facebook! Pinterest also may have a market advantage over Facebook. The site attracts a certain type of person, one who likes to collect or curate or scrapbook. The members tend to be hobbyists and as such they tend to be avid. One investor characterizes them as "voracious" in their use of the website. Ironically it tends to encourage true sharing in a way Facebook does not.  As Susan Etlinger, a technology analyst and consult describes the difference: "Facebook used to be about connecting with your friends, but now it's do focused on the individual, with curating your timeline and how you present yourself to the world. " Facebook isn't structured to bring together communities of interest.

Furthermore, because Pinterest members tend to be both collectors and people who shop online, they represent an active group of purchasers with vast market potential down the road. Like so many start-ups Pinterest has to date relied on private investors and venture capital so far--to the tune of $40M. But eventually they'll have to figure out how they're going to make money and many investors believe their member base could represent a real gold mine.
 
Other news out of the South by Southwest technology conference in the past few days indicates that start-ups are distancing themselves from Facebook as they see the social networking giant becoming more profit-oriented. They worry that the rich data Facebook currently provides to its users could become accessible only at a price in the future. Although they for the most part continue to have Facebook as part of their model, more and more start-ups are making sure they build their own apps in ways that allow them to be independent of Facebook. As one entrepreneur puts it, Facebook is "our greatest opportunity and our greatest risk." For more see "Start-Ups Resist Facebook's Pull" in last Wednesday's edition of The Wall Street Journal.
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