If there's one constant in the chaotic technology industry, it's that nobody stays on top for long.
When News Corp. purchased MySpace in the summer of 2005 for $580-million (U.S.), it was one of the most popular social networks anywhere. By the time it was resold for less than a 10th of that price last year, it had become an Internet punchline.
Research In Motion, which just a few years ago invented the smartphone, is now hemorrhaging market share to the likes of Apple. But even Apple was close to bankruptcy a little more than a decade ago, and may decline again when some competitor bests the iPhone and iPad.
No matter how dominant a tech firm looks, its days of dominance are numbered.
There's little doubt 2012 will be Facebook's year at the top. This week, the company made a filing with the U.S. Securities and Exchange Commission in preparation for an initial public offering that will probably value the world's most popular social network at about $100-billion and make its founder, Mark Zuckerberg, a billionaire 28 times over.
Many have tried (Google Plus, anyone?), but though a few other social networks, such as Orkut, have limited success in certain parts of the world, Facebook is the undisputed leader: One out of every nine people on the planet has an account. That kind of lead is almost insurmountable.
Almost. It may take five years, 10 or even more, but Facebook's reign will one day come to an end.
Here are five phases in which that could happen – and probably will.
More than 845 million people, out of the two billion on Earth with Internet access, log in to Facebook at least once a month. As long as it's still growing, investors remain excited. But as it runs out of places to expand, its viability will become more directly tied to how much personal information it can collect and exploit: Whereas Google can tell advertisers only what websites you like to visit, Facebook can tell them your age, marital status, holiday destinations and just about anything else.
In its SEC filing, the company said: “To the extent our active-user-growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement in current and new markets.” And as investors push, Facebook will face much more pressure to build …
A walled garden
Already, signs are rampant that Facebook wants to keep you within the confines of its service as much as possible. Where users once posted links to news stories, which would take you to those websites, the social network's preferred method today is to embed those links into apps designed specifically for Facebook. The new feature has ruffled some feathers, but like all Facebook's previous design decisions, it hasn't led to an exodus. As the service's embrace becomes more and more suffocating, however, it will eventually prompt …
Facebook has always said its service will forever remain free. But that depends on your definition of currency: More and more, users are looking at their personal data as a form of payment. Any attempt to collect and leverage more of it – whether to sell you khakis or to hook you on FarmVille – will be seen as a price hike.
Right now, that's not much of a concern for many of Facebook's users, in large part because the site offers perhaps the best and most connected service of its kind (unless you live in Brazil, chances are most of your friends aren't on Orkut). But that may change, especially when those users have more …
You may have never heard of Diaspora, but it's part of a wave of tiny new Facebook competitors. The site, currently still in production, was designed as a sort of privacy-first alternative to Facebook, giving users far greater control in how much of their information they disclose.
But privacy is just one of the areas competitors are targeting. A number of services, such as Path and Yammer, have focused on what might be described as private mini-networks: Instead of having 800 friends, 20 of whom you actually talk to on a regular basis, those services allow you to create small, personal networks of friends, family or co-workers.
Not that any of these services are going to sink Facebook, but they will give users somewhere else to spend their time. And inevitably, one of those services (or one yet unborn) will become …
The next big thing
Google was never designed to compete with a service such as Facebook, just as Yahoo was never designed to compete with Google. Each company was designed to solve a current problem, not a future one. When Facebook and Twitter offered users the ability to ask friends to name the best Italian restaurant in Vancouver, rather than getting a list of four million computer-generated results, Google was caught flat-footed.
It's that kind of unpredictability that will bring about Facebook's fall from the pinnacle of the tech industry. Just as RIM never saw the consumer smartphone coming, the social-network industry Facebook helped create will one day take it by surprise.
Omar El Akkad is The Globe and Mail's technology reporter.