Analysis: Is Facebook reaching the peak of its success?

Facebook’s much-anticipated filing for an initial public offering (IPO) may have fallen short of some expectations. The social networking company plans to raise $5bn, half of what some analysts had predicted. But the technology community should not consider the IPO a trivial move by any means. This is will be the largest amount of money an internet company has ever raised for an IPO, and towers over the $1.67bn Google raised in 2004.

However, by filing for an IPO, Facebook has immediately placed a new level of pressure on itself, with investors  scrutinising whether it has the ability to succeed in the long term, or whether it will follow the likes of Myspace and Friends Reunited and fall by the social wayside. 

Is it likely that Facebook could face competition from a Silicon Valley newbie? Gartner analyst, Michael Gartenberg, believes that Facebook has been successful in cementing its position and it will take a lot for it to be usurped.

“At this point Facebook has grown to such a size, and the market has matured so much, that it would be very difficult for a smaller company to come along and unseat them the way that they unseated other companies,” said Gartenberg.

“However, this doesn’t mean that it isn't going to face challenges from larger companies like Google, for example, which has shown a very strong interest in driving social across all of its properties,” he added.

“But the idea that a small start-up is going to come along tomorrow and effectively challenge Facebook is a very unlikely scenario.”

Ovum analyst Adrian Drury argued that Facebook could fall victim to the same problems experienced by the likes of Google.

“Google has a talent retention problem, and it is likely that Facebook will face the same problem in the future, which could cause it problems internally and in the market. At some point Facebook isn’t going to be the hottest kid in the Valley any more, and some new business is going to be attracting the type of talent that Facebook is attracting today,” said Drury.

“This is because new businesses are on a growth curve and they are offering a financial incentive and offer stocks that make them an attractive place to work. Facebook will not be able to offer new talent the same financial upside in terms of equity, which could impact how innovative it is,” he added.