There is a very important limitation in Facebook's business model: the assumption that everyone can be friends with everyone else.
While in real life we have 4-5 true friends that accompany us during a long time, on Facebook we have houndreds of friends remaining our "friends" on the website even though we haven't seen them talked to them, or even thought about them in the past 10 years. Utility friendships are the ones that are available when there is an utility but as soon as the utility is no longer there they fade away. In the past years millions of people had turned to "more intimate" communication methods in order to "save" their friendships. These applications are Whatsapp, Snapchat, Messaging, Secret. More and more people are turning to LinkedIn or twitter when it comes to communication with other members of society.
Facebook had recently acquisited WhatsApp for $19 million in order to be able to stay in the lead in online communication. In short term this action has a positive effect on the company with the increase of it's market share but the question is: Will Facebook be able to pay these high premiums alongside the years for every upstairs that challenges its market dominance?
This strategy is not sustainable as the owners of the other companies will demand higher and higher premiums for their risk taking.
While in real life we have 4-5 true friends that accompany us during a long time, on Facebook we have houndreds of friends remaining our "friends" on the website even though we haven't seen them talked to them, or even thought about them in the past 10 years. Utility friendships are the ones that are available when there is an utility but as soon as the utility is no longer there they fade away. In the past years millions of people had turned to "more intimate" communication methods in order to "save" their friendships. These applications are Whatsapp, Snapchat, Messaging, Secret. More and more people are turning to LinkedIn or twitter when it comes to communication with other members of society.
Facebook had recently acquisited WhatsApp for $19 million in order to be able to stay in the lead in online communication. In short term this action has a positive effect on the company with the increase of it's market share but the question is: Will Facebook be able to pay these high premiums alongside the years for every upstairs that challenges its market dominance?
This strategy is not sustainable as the owners of the other companies will demand higher and higher premiums for their risk taking.
Source: http://en.m.wikipedia.org/wiki/WhatsApp
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