David Prosser: Facebook in decline? Business has never been so good

Outlook: The average user spends almost seven hours a month on Facebook – the comparable figure for Twitter is just 24 minutes
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The Independent Online

So much for the demise of Facebook. Reports that the social networking site has begun to see a decline in its user numbers in its most established markets, including the UK, were rather undermined by yesterday's data from the authoritative market research group Nielsen, which suggested Facebook's popularity was continuing to grow strongly in this country. The same is true for Twitter, Nielsen added, not least thanks to the Ryan Giggs furore, which saw a big rise in traffic.

The data will be reassuring for both companies, though monthly updates, whether positive or negative, will continue to be volatile. What's particularly interesting about Nielsen's numbers, however, is the demographics underlying them. At both Facebook and Twitter, the growth is coming especially strongly from older users, particularly the over-50s.

That's good news for the social networks. The problem with the early adopters of technology trends, particularly the under-25s, is that they have little spending power. Facebook and Twitter may have enjoyed the kudos of being the latest big thing with the kids, but that audience was not particularly commercially attractive.

Advertisers would much rather spend money with a service providing access to older customers. The over-50s demographic is ideal, for it includes the sector of society with, on average, the largest disposable incomes.

In that sense, Facebook and Twitter will have been cheered by this data. For both companies, a proposition for advertisers, in one form or another, represents the best chance of monetising their popularity. Facebook is already much further down that path than Twitter, but the broadening of appeal this data suggests ought to translate into additional revenues for both.

Still, it isn't all good news. While social networking sites need this wider user base, they don't want to lose their early adopters, because they may find edgier, more exclusive alternatives – and eventually lure everyone else away too.

Happily for Facebook, that does not appear yet to be a problem – its user numbers are still growing across all age ranges. But this is less true for Twitter, where there is some evidence growth has come to a stop among younger users.

There's a similar divergence, by the way, on another factor which is important to advertisers: how long people actually spend on these sites. Again, Facebook wins, with the average user spending almost seven hours a month on it. The comparable figure for Twitter is just 24 minutes.

What does this mean for the finances of Facebook and Twitter? Well, the former will find Nielsen's data useful as it continues its progress towards a flotation early next year.

For Twitter, however, the doubts about its long-term commercial viability continue to persist.

Ocado is capable of defying the sceptics

Don't write Ocado off. Having waited nearly a decade for the company to break into profit, investors greeted yesterday's move into the black with disinterest, choosing instead to focus on headwinds such as the imminent launch of a rival service from Waitrose and the ongoing squeeze on consumer spending.

That's unfair. It is clear that Ocado hasn't added capacity as quickly as it might have done, which has held back sales, but the company is now making money – despite scepticism that it ever would during the run-up to last year's stock market flotation.

Moreover, anxieties about the future are overdone. Instinctively, one would expect Ocado to suffer when consumers are feeling the pinch because it sells at the more expensive end of the market. But on the high street, it is the grocers in this space whose sales are currently proving most resilient.

The data published last week by Kantar on grocery sales revealed Waitrose as one of the winners in recent months – it also noted good growth from ranges such as Tesco's Finest. Ocado's target customers, in other words, do not appear to be feeling the squeeze as strongly as many others.

What of the Waitrose threat? Well, it would be churlish to dismiss it, but it's not as if Waitrose is going to be offering a superior product range. This will be a contest fought on service – and on that front, Ocado has generally been outstanding in every way. It offers shoppers more flexibility, a better web service, its drivers turn up when they say they will and they're unfailingly helpful and polite.

Indeed, the most worrying statistic of all in Ocado's update to the market was, for me at least, the fact that the number of orders delivered on time fell from 94.9 per cent to 92.7 per cent during the first six months of the year. If that were to become a trend, Ocado really would be in trouble.



Noble sentiments, but let's see some action

What's in a letter? The Financial Services Authority (FSA) yesterday pledged that its metamorphosis next year into the Financial Conduct Authority (FCA) would see a more proactive approach to consumer protection. Fine, but can the FCA, staffed by more or less the same people as the FSA, live up to the promise?

As the FSA itself concedes, one of its failures has been to sit passively on the sidelines watching mis-selling scandals develop, intervening at too late a stage. As the FCA, it now promises to try to nip such problems in the bud at a much earlier stage.

We shall see. The good news is that the FCA does have some new powers – such as the option of outright bans on products, for example, as well as a greater role in monitoring advertising. But the absence of such powers in the past surely should not have prevented, say, the FSA putting a stop to banks selling people payment-protection insurance on which they would never be able to claim.

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