In Talk of Declining Traffic, Facebook and Others Say: Not So Fast

If you find Facebook boring and/or its privacy policies worrisome, you apparently aren’t alone. According to a newly issued report by the research and marketing group Inside Facebook, 6 million Facebook users have canceled their accounts in the last month, “the first time the [United States] has lost users in the past year,” according to report’s author, Eric Eldon. (Canada also lost 1.52 million users last month, says the report.)

Much has been made in the wake of these findings, especially since CNBC reported this morning that Facebook plans to go public by Q1 2012 at a valuation in excess of $100 billion. If Facebook’s wild growth is leveling off, that certainly wouldn’t help its IPO plans. Eldon says Facebook gained 11.8 million new users worldwide last month, down from 13.9 million new accounts in April. That’s notable because “while there have been a few months that have registered lower growth numbers, they have not been back to back,” he writes.

Still, it’s way too soon to suggest the company has peaked.

Facebook, for its part, asserts that Inside Facebook’s report makes much of little. In an email to peHUB, a Facebook spokesman writes: “From time to time, we see stories about Facebook losing users in some regions. Some of these reports use data extracted from our advertising tool, which provides broad estimates on the reach of Facebook ads and isn’t designed to be a source for tracking the overall growth of Facebook. We are very pleased with our growth and with the way people are engaged with Facebook. More than 50 percent of our active users log on to Facebook in any given day.”

It’s a point also made by social media analyst Lou Kerner of Wedbush Securities. In a conversation earlier today, Kerner pointed out data that was overlooked by Inside Facebook, like increasing page views and frequency of visits (at least, according to Alexa). “That’s what we look at when gauging the vibrancy of a website,” he says. (Kerner owns shares of Facebook, predating his employment with Wedbush.)

Kerner also disagrees that China will become Facebook’s Achilles’ heel, despite Inside Facebook’s concerns over “how much further [Facebook] can go if it is to reach its goal of 1 billion monthly active users” if it doesn’t get into China…” The report suggests such a move “could both give [Facebook] access to hundreds of millions of users and compromise its reputation in the U.S. and many other countries around the world.”

“Facebook will enter China through a partnership,” predicts Kerner. It’s simply “too huge” to bypass.

Even digital media analyst Greg Sterling, who considers Facebook to be “vulnerable,” says he would need to see at least three more months of hard, detailed data, to suggest that Facebook’s best days are now behind it.

“[Facebook CEO] Mark Zuckerberg has characterized Facebook as a utility — a communications utility — but I’d argue that it hasn’t yet made itself into one the way that Google has,” says Sterling. In the same same way that we joined Facebook because our friends did, we’re likely to leave if those same friends become less engaged, he says.

There’s not nearly enough information to suggest that’s happening, though, Sterling says.

For example, Inside Facebook claims that when “Facebook reaches around 50 percent of the total population in a given country (plus or minus, depending on Internet access rates in that country), growth generally slows to a halt.” But Sterling points out that “it’s not necessarily cause for concern unless this is consistent with larger trends over the next few months. If you could go in and interview those people and ask them [why they abandoned the service], you’d have some interesting information, but we don’t have those answers right now.”

If Facebook’s user base in the United States continues to shrink, “I think they’ll need to diagnose what’s going on, but it would be very premature to call this the demise of Facebook,” says Sterling, adding: “People always want the contrarian story.”