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Friday, October 30, 2009

Has Facebook Been Lucky?

After having written my latest blog entry on Google versus Facebook and my appearance on the CNBC show Street Signs I got to thinking. The question posed by observers at this stage should not be so much is Facebook doing all that they can to capitalize on the significant increase in traffic and engagement but rather why is it happening and, if more can be done to increase the traffic further or,…could the party all end tomorrow?

We all have to admit the trends I revealed in my previous blog (see Figures 1 & 2 below) are quite amazing showing that Facebook has already surpassed Google in terms of page views and is fast approaching Google in terms of unique visitors. But it begs the question why.

Figure 1

Figure 2

After careful investigation, Rhonda Drake, my business partner and wife, kept staring at the latter curve and thinking it looked familiar. A light bulb went off and she realized it looked the same as the unemployment curve. Upon further examination we determined that the correlation of Facebook unique visitors and the unemployment rate is close to 98%. You can’t get much higher than that. Take a look at the graph below (Figure 3).

Figure 3

You will also notice on Figure 3 that the steep increase in engagement begins to take place last year at the same time the bottom fell out of the mortgage lending industry in August and September of 2008.

So now the question is, does this make sense?

Remember, we must be careful at jumping to conclusions of cause and effect. As a reminder, see my previous blog entry title How is this Economy Impacting us Emotionally which was posted on March 11, 2009.

But in this case I think the connection makes perfect sense. As more and more people were being laid off last year and this year, they began to flock to social media sites, connecting with others and discussing issues and concerns.

What is also interesting regarding the Figure 3 data, is that as the unemployment rate has begun to flatten over the past few months (July – September 2009) so has Facebook’s unique visitor count. Coincidence? I am not sure.

When trying to assess Facebook’s engagement metrics such as page views per visit (or unique visitor) and average time on site per visit we notice a couple of things. First, the number of pages viewed per visit is going down. This alone might indicate to some that the engagement of those visitors is waning. However, when we go a bit deeper in our analysis and examine the average time spent on site per visit we notice a slight upward trend. So what does this mean? It means more time is being spent on fewer pages being viewed. One explanation might be the various games and other engagement tools that Facebook has been promoting. These games might be increasing our time at the detriment of going deeper on the site per visit. Is this a good thing? I am not sure. Does this yield opportunities with sponsors? That is for Facebook to decide. See figures 4 and 5 below for these data.

Figure 4

Figure 5

To help better understand our increasing engagement findings, I decided to make a comparison to YouTube. And, the results are astounding. Facebook has actually overtaken YouTube as of June of 2009 in terms of time spent per visit. Facebook is now more engaging than YouTube. Wow! This is a major accomplishment. See the graph below (Figure 6). This makes sense is light of the fact that Facebook is designed to allow you to share content (including video) easily with your circle. No need to leave Facebook.

Figure 6

So will Facebook soon overtake Google in terms of unique visitors as the graph in Figure 2 might suggest? Or will it still be some time coming?

Based on our analysis it is not possible at this time to predict when, if at all, Facebook will overpower Google in terms of unique visitors. The relatively recent past is revealing a completely different pattern than the more distant past. As such it is hard to forecast the future. Is the economy behind this pattern as previously suggested? Very soon we will know the answer to this question. Hang on.

However, we do feel confident that we can predict Facebook will overtake Google in the number of visits by the end of 2009. See Figure 7 below.

Figure 7

Of course this assumes no major or unforeseen changes in our economic climate. :-)

Perry & Rhonda

Please note that all traffic data for this analysis was sourced using compete.com

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