Facebook Will Face Several Challenges in 2017

What goes up, must come down. While Facebook was an investor favorite in 2015, the company has lagged the broader market this year. However, that has not stopped user growth which breached 1.2 billion active users in 2016. Even with the growth, there are some storm clouds on the horizon for the company.

From an investor standpoint part of the concern is about the sustainability of the company’s revenue growth. This includes fears of an advertising slowdown as well as inability to monetize the company’s assets. Another issue is trust, which has taken a hit in recent months given the rise of fake news which many believe impacted the U.S. election and ended the year with a false positive Safety Check alarm earlier this week.

Facebook Advertising

Regarding advertising, the company has been busy trying to jam ads into user’s feeds, but some analysts note that Facebook is running out of real estate. Granted they can shift to video adds, but the ‘ad load’ metric appears to be nearing maximum capacity. As such, the company needs to find a way to rebalance advertising while making sure that the users remain engaged with the Facebook on its multiple platforms.

Facebook Nasdaq
Stock Photo: NEW YORK – MAY 18: Sign announcing Facebook IPO is flashed on a screen outside the NASDAQ stock exchange at the opening bell in Times Square on May 18, 2012 in New York City. (lev radin / Shutterstock.com)

Then there is the constant dialogue on how to monetize Facebook. This has dogged the company since its founding and while post-IPO Facebook has largely proved its critics wrong, observers continue to remain concerned.

Some of these concerns may be well founded.  The company paid $19 billion for WhatsApp in 2019, but it would appear that the acquisition has done little to benefit Facebook’s bottom line.  This concern is not without merit. WhatsApp currently boasts more than 1 billion users, but to date, the company has resisted copying some of the methods adopted by other messaging services, such as Line Company of Japan.

Oculus Rift

Oculus VR
Stock Photo: SAN FRANCISCO – MARCH 20: Oculus VR unveiling the second version of The Rift, its Virtual Reality headset for PC just before being bought by Facebook at GDC 2014 on March 20, 2014 in San Francisco, CA (Barone Firenze / Shutterstock.com)

In addition, there is Oculus. While Virtual Reality (VR) holds great promise, the technology has yet to reach the mainstream. Furthermore, consumer VR is likely to become a battlefield as smartphone manufacturers move into the space. That being said, tremendous opportunity remains in the space – these include applications such as education, training, tourism, and healthcare.

The future of Facebook

The final challenge is the question of how Facebook will win back trust. In fairness, the company has become a victim of its own success.  The social media platform was never meant to be a source for news. But given the size of the platform, the news media had no choice to set up Facebook feeds. This opened the door for fake news, much of which is given credibility when it is shared by someone’s connections. Such news stories led to triggering the company’s Safety Check, as mentioned earlier.


Please enter your comment!
Please enter your name here