Being one of the biggest and most used social media network platforms in the world, Facebook has made an impact on almost everything from businesses to industries etc. Apart from all the other interactions for which most of the generation uses Facebook for, Facebook is a very powerful tool for business owners running and operating small and medium and large scale businesses. However, the CEO of the Snapchat has predicted that Facebook will implode the same way Yahoo! did.
Evan Spiegel, the CEO of the company has a strong feeling that the journey of Facebook might end abruptly despite of being one of the biggest companies in the world right now. It is believed that FB is one of the most used social media platforms which generates high revenues and keeps expanding every now and then.
When the dot-com business was on the rise, Yahoo! Inc., had a market capitalization of over more than $128 billion which is quite massive. However, as soon as this business started to decline, the value of the company also declined as Yahoo mostly relied on generating revenues through advertisements. According to Business Insider, “The companies buying Yahoo’s ads weren’t traditional brand advertisers — the kinds of companies that bought TV and magazine ads. They were dot-coms themselves. They were paying inordinate sums to become Yahoo’s official partners in various sectors, from greeting cards to pet stores to travel.”
Hence it is believed that FB follows the same mechanism as well. The money that Yahoo spent and FB is spending on advertisements both came from the investments made by venture capitalists and not their own revenues.
The Snapchat CEO believes that “Facebook‘s ad revenues are also overdependent on venture-backed startups buying traffic and users. Only instead of buying links on the Yahoo homepage, they’re buying app install ads.”
In a nutshell, this strategy might cost the company in the longer run where it would be hard to sustain the business as well as revenues.