Almost nobody under the age of 21 today has even heard of Myspace, but back in the early oughts it was one of the hottest properties on the Internet. In 2006, Myspace supplanted Google as the most visited website in the U.S. Myspace only stayed on top for a few years, however, as Facebook Inc (NASDAQ:FB) began its meteoric rise and overtook Myspace as the most-visited website in the U.S. in May 2009. The rise of Facebook was the beginning of the end for Myspace, which continued to lose visitors despite several site redesigns. Myspace had dropped to the 233rd most-visited website in the U.S. as of June 2013.
Nearly all market analysts and scholars agree that Facebook Inc (NASDAQ:FB) offered a superior “product” than Myspace, and most were content with that as an explanation for Facebook Inc (NASDAQ:FB)’s huge domestic and international growth. Naysayers have long held, however, that Facebook was just a bigger and longer “flash in the pan” than Myspace, and that it would eventually also crash and burn like its predecessor. A recent study conducted by researchers at Princeton University offers support to the naysayer thesis.
Was Ben Graham's big purchase of GEICO shares actually a value investment? Perhaps it was contrary to what many believe. "In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people." -- Benjamin Graham, 1976 Both Benjamin Graham and Warren Buffett can attribute a large part of their Read More
Facebook as a disease
Researchers at Princeton’s Department of Mechanical and Aerospace Engineering published a study on January 17 that examines the life cycles of online social networks using epidemiological models. According to the researchers, “Ideas, like diseases, have been shown to spread infectiously between people before eventually dying out, and have been successfully described with epidemiological models.”
Facebook may begin rapid decline in 2015
The researchers’ model predicts that Facebook Inc (NASDAQ:FB) will begin see a decline in users in about a year or so, causing the site to lose around 80% of its peak user base sometime between 2015 and 2017. The model assumes that once a few users stop using Facebook, a certain number of their friends and family will also stop using the social network, eventually leading to an avalanche of users moving on to other alternatives.
One analogy might be that Myspace was like a disease that was only “mildly infectious”, so the entire infection phase and recovery cycle was shorter than the “highly infectious” Facebook Inc (NASDAQ:FB) disease that is just now approaching its peak and will soon begin its recovery (ie, losing users).