The Facebook Threat to Carriers

Facebook and social networking in general are having challenges monetizing the tremendous volume of page views they generate but undeterred, social networking leader Facebook is expanding its potential to make money by selling virtual and physical goods in its gift shop. The company is running tests which allow users to purchase various goods for credits.

This may be a good time to address the fact that as of now this service is so entrenched that it has replaced telephone numbers as a primary form of communications for many. You could argue FaceBook already has a replaced most every phone company as the network of choice for communications. Skype and Twitter are other competitors in this regard but communicating in 140 byte increments seems crude to me – like using smoke signals. I still think Twitter is part fad.

But getting back to Facebook – what if the service is able to become a competitor to eBay and/or Amazon. Imagine Facebook emboldened by a model of revenue generation which works.

I would think the people in the company think massive profitability is around the corner as waiters in numerous Silicon Valley restaurants seemed to be happy to share stories about how much Facebook execs spends on wine and food in their restaurants. Whether the company has too much money, thinks they are entitled to work hard and play hard or feel they will be the next Google from a profitability perspective is unclear at this juncture but I am sure we will learn more soon.

What is crystal clear today however is that traditional carriers have lost their lock on their customers and every day they lose it a little more. It is the exact opposite of the grip of a hungry boa constrictor which tightens after each exhalation.

It is tough to know in advance if Facebook will be successful as a “baby” Amazon but so many people live within the application and it seems there is the potential for the company to come up with a way to benefit financially from all the clicks and eyeballs.

And if they do, carriers should be more concerned than they are now. After all, Google, Skype and Facebook are all gunning to be the primary keeper of the customer relationship and as they become more entrenched, carriers have the challenge of figuring out how best to integrate with applications from leading web vendors without becoming a simple commodity broadband provider.

Expect the conversation to continue at ITEXPO in Los Angeles September 1-3, 2009. It should be very exciting. The industry is at a crossroads.

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