Latest quarterly results from bellwether Apple Inc. (AAPL - Analyst Report) have shown how precariously placed the technology company is at the moment. Once the darling of the markets, many believe that the best days of the iPhone maker are over for all practical purposes. We are now looking at IBM Corp. (IBM - Analyst Report)-like prospects from the company, with above average growth but nothing like the kind witnessed in the salad days of the late Steve Jobs.
In fact, Apple’s current boss Tim Cook has had to reassure investors that the company has “some really great stuff coming in the fall and across all of 2014.” This is in sharp contrast to founder Steve Job’s secretive (some would say arrogant) approach in the past. In fact, Cook has adopted an open attitude which is designed to show how concerned the company is about customers who spend a large amount of their time using Apple products.
All this clearly illustrates how fickle the fortunes of a technology company can be. So if a technology firm, even a giant, falls behind the level of innovation required stay on top of its game, it is looking at hard times. A survey released by Piper Jaffray Companies (PJC - Snapshot Report) this month shows that Facebook, Inc. (FB - Analyst Report) and YouTube -- owned by Google Inc -- are fast losing popularity among teens compared to a year ago.
This is a trend which, if largely true, could prove to have far-reaching effects for companies from the retail, fashion and gaming segments as well as others catering to this age group. This is because teens constitute a consumer segment worth $819 billion. And what people have to say on social media significantly impacts the purchase decisions of customers. According to the study, more than 50% of teens have said that social media influences their purchase decisions.
This is why marketers focused on this segment have to constantly match the changing preference of teens and their social networking behavior. The report from Piper Jaffray shows how this phenomenon is reflected in the real world. Abercrombie & Fitch Co. (ANF - Analyst Report) and Best Buy Co., Inc. (BBY - Analyst Report), who were on the list of top ten ecommerce websites but no longer figure this year, have lost out in terms of sales as well.
While YouTube continues with its attempts to push up revenue through innovative advertising, Facebook has more than a few problems on its plate. The likes of Whatsapp are fast grabbing share of the time people until very recently spent on Facebook. More and more time is now being spent using these messaging apps, and Facebook is fast losing its young and contemporary image. Meanwhile, Google Plus has increased its number of “social sign ins” significantly in a relatively short period of time. And Orkut still remains a force to reckon with in India and Brazil.
Facebook often says that its huge database of user information gives it a major edge over other social media networking options. However, how high the switching cost of Facebook actually is remains debatable.
Of course, Facebook continues to be the most popular website worldwide. Users continue to spend several hours a week on the site. However, it has fallen behind on the technology front, as is illustrated by the Whatsapp example. The newly introduced “Graph Search” function has yet to achieve much popularity despite the hype surrounding its launch. Meanwhile, the new Android-based launcher “Facebook Home” has received largely negative reviews. It remains far from popular on the Google Play store.
In contrast, a more focused site like LinkedIn Corp. (LNKD - Analyst Report) has increased revenues and profits through a clear and decisive strategy. Its switching costs remain high since it focuses only on business professionals. As users switch off from Facebook to allot more time to their real lives, the social networking behemoth needs to become more relevant to users and advertisers alike. Technology, strategy and management all need to be changed radically. It seems Mr. Zuckerberg has his work cut out for him.