For Facebook, the first half billion were easy

Analysts say social network will likely have have a much harder time reaching the billion mark

Facebook may have secured its place at the top of the world's list of social networking sites with yesterday's announcement that it passed the 500-million user mark. But industry watchers think that signing up the next 500 million Facebook users may be a lot harder.

Facebook is easily the dominant social networking site, eclipsing traditional rivals like Myspace along with multiple emerging competitors. But at the same time, 2010 hasn't been an easy year for the company, dealing with users angered over the site's privacy policies and controls . Just this week, a survey showed that in general, Facebook's legions of users are unhappy with the site.

The privacy issues were among those cited by analysts in suggesting that Facebook may have a tougher time gaining its second half billion users.

"Five hundred million is an amazing feat that no one would have predicted from Facebook's Harvard dorm days," said Hadley Reynolds, an analyst at IDC. "They've obviously cracked the code on social networking by making it more fun and more useful and more integrated into life than any of their predecessors.

"But from here it gets tougher," he added. "Their growth will slow, and if they continue to make inept changes in their product and their policies, they could make it slow down faster."

Brad Shimmin, an analyst at Current Analysis, noted that Facebook needs to fix its privacy problems before they become too big a hurdle for the company. Until now, simple old-fashioned peer pressure has kept users hooked on Facebook despite their frustrations with the site.

"It's all about this participation drive that people have," said Shimmin. "When you have five of your 10 best friends asking why you're not on Facebook , eventually you get on Facebook. All the problems, all the application issues, all the privacy issues ... if enough people are participating, you'll just put up with it. If your objective is to connect with your peers, you'll forgo some safety."

Basically, analysts say, there's a threshold of unhappiness that has to be met before people leave Facebook. And that threshold simply hasn't been met yet for most of the site's users.

However, if the current frustration and dissatisfaction isn't stopped by Facebook, users could become more open to adopting a new social network. And while Facebook has no serious rivals today, a popular new social network could appear on the horizon at any time.

In fact, recent rumors suggest that Facebook could soon be facing off directly against the Internet giant, Google, which is said to be working on a Facebook-killer -- or at least a potential Facebook rival offering. Dubbed Google Me by the blogosphere, the service would seek to grab a good chunk of Facebook's user base, as well as its revenue.

"I think it will be tougher for [Facebook to get] the next 500 million [users]," said Shimmin. "Just because of the raw numbers, it will be harder, but the more successful Facebook is, the more competition there will be on the horizon."

Once a significant number of Facebook users leave the social network, others could become comfortable making a decision to leave. Once there is critical mass, users will find that they can catch up with a lot of friends and relatives on another site. At that point, the wave of adoption of a new social network should multiply.

Rob Enderle, an analyst with the Enderle Group, said Facebook must work quickly to change people's negative perception of the site.

"They have to reemerge out of their cloud of problems and start being perceived as a service that solves problems instead of creates them," he said. "Instead of appearing as a bad use of time they have to provide a return consistent with the effort that people put into it. They need to seem to be something other than aggravating, old and boring."

Augie Ray, an analyst with Forrester, said Facebook has to successfully complete a hefty to-do list to remain as popular as it is now.

"This will require more focus on internationalization, continued innovation, but also an eye toward the concerns consumers have voiced about the platform," Ray said.

"As this week's ACSI report demonstrates, people may be addicted to Facebook, but they aren't particularly satisfied with it. Growing to 1 billion users, particularly as potential competitive social networks are launched by Google and others, will take an ever greater eye toward building trust and loyalty, not just usage," he added.

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Sharon Gaudin

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