The Problem With Facebook Inc (FB) – LinkedIn Corp (LNKD), Google Inc (GOOG)

Facebook Inc (NASDAQ:FB) has a serious problem. According to different surveys and media reports, many of its users are starting to lose interest in the social network and spending more time in networks like Twitter, Instagram and Tumblr among others. Although the Facebook Inc (NASDAQ:FB) won’t disappear anytime soon, reduced engagement could be a serious setback when it comes to revenue growth and financial performance for the company.

Facebook Inc (NASDAQ:FB)Not So Cool Anymore

Facebook Inc (NASDAQ:FB) admitted in its 10-K that it may be losing some if its users to other services like Instagram which, fortunately for the company, is owned by Facebook Inc (NASDAQ:FB) itself.

“We believe that some of our users, particularly our younger users, are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook. For example, we believe that some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram. In the event that our users increasingly engage with other products and services, we may experience a decline in user engagement and our business could be harmed.”

And it’s not only Instagram. According to some surveys Tumblr is above Facebook Inc (NASDAQ:FB) in terms of usage among the young, and apps like Snapchat are gaining a lot of ground too. It may be tempting to say that teenagers are always looking for the next big thing, but there is more to this shift than just the novelty factor.

Identity Crisis

Facebook Inc (NASDAQ:FB) has an identity crisis. Is it a place to have fun with your friends, to stay in touch with your family, to promote your professional work or to meet new people for a romantic relationship? Facebook Inc (NASDAQ:FB) would probably like to think that it serves all those purposes, but you can’t do all those things at the same time and do them right.

Many teenagers are probably going toward other social networks because they don’t appreciate the fact that their parents can see their activity on Facebook Inc (NASDAQ:FB). By the way, those pictures in which you’re drinking beer from a barrel don’t reflect too well on your aptitudes as a brain surgeon. Facebook Inc (NASDAQ:FB) has some fairly customizable privacy options, but most people pay little or no attention to them.

That’s a problem LinkedIn Corp (NYSE:LNKD) doesn’t have. Everyone knows that it is intended for professional networking, so you will find many resumes and professional articles there, but no “drinking beer from a barrel” pictures. Being more specific than Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) has less traffic, but that’s not a big problem since the company has other venues to make money apart from advertising, such as hiring solutions and premium services.

Google Inc (NASDAQ:GOOG) has developed a technically smart solution for this problem when it comes to Google Inc (NASDAQ:GOOG) Plus. People can assign their contacts to different “circles” and then choose which pieces of information they share with each circle. The beer picture would probably be shared with the “high school friends” circle and not with the “colleagues and patients” one.