Facebook Fatigue has begun

Number of U.S. users drops 5% in May; international growth slows

Facebook Deactivate thumbnail_1.jpgPhoto credit: Facebook

Did Facebook wait too long to go public?

Unless the company can reverse its membership decline in the U.S. market and overall slowing global growth, the answer is yes.

(Also see: Report: Group of Facebook investors eager to dump shares and How to ruin your life with social networking)

According to Inside Facebook, the social networking site lost 5.8 million U.S. users in May, the site's first sequential monthly loss. Facebook's total U.S. users fell to 149.4 million from 155.2 million in May.

But Facebook didn't lose members just in the U.S. Usage in May was down more than 100,000 each in Canada, the United Kingdom, Norway and Russia.

Yes, it gained 11.8 million users in May globally, but that's down from 13.9 million in April, according to Inside Facebook. Some perspective from Inside Facebook's Eric Eldon: "In contrast, it grew by at least 20 million new users over the typical month in the past 12; while there have been a few months that have registered lower growth numbers, they have not been back to back."

So what does this all mean? Perhaps nothing but a blip on the growth screen. But I'd be feeling slightly anxious if I were a Facebook investor.

Remember, the power of Facebook as an investment is its presumed standing as the social networking platform that is most integrated into members' lives, giving it a compelling story to tell (and better data to give) advertisers.

Facebook supposedly is so, so popular, and so ingrained into its users' lives, that it literally is too big to fail!

That argument gets undercut when members start walking away to do other things, either online or off. That's what started to happen to Myspace a few years back. And once the unraveling begins, it's hard to stop.

Facebook is not immune to that phenomenon, no matter what its most ardent cheerleaders wish to believe. Like anything that gets overused, people eventually grow tired of it.

Which gets to something I've argued in the past. What Facebook offers isn't essential. Fun, entertaining, interesting -- sometimes. But 6 million people in the U.S. just stopped using it, as did more than a half-million people in several other countries. I'll guarantee right now they will feel few (if any) pangs of withdrawal.

Remember, Facebook isn't like a wireless carrier -- no users are being held hostage by an early termination fee. Facebook costs nothing to join, and it costs nothing to leave.

I say Facebook Fatigue officially has begun.

The company's response will be 1) a big marketing push to reverse the user decline in mature markets and 2) an initial public offering before the end of 2011. Because there'll be a lot fewer suckers around next year.

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