In the past few years, we’ve watched as major U.S. financial institutions went bankrupt, a global recession set in and a string of sovereign debt crises wracked Europe. Development has even slowed in China and India. Even the U.S. Postal Service is struggling.
This turmoil should serve as a reminder to financial professionals that no investment is perfectly safe and even a highly successful business model may become outdated over time.
For example, consider the situation currently confronting Facebook. As consumers shift toward mobile devices – tablets and smartphones – the social media company’s business model is being put under a considerable amount of stress, as it generates little revenue from mobile traffic.
According to documents the business filed with U.S. Securities and Exchange Commission (SEC), 85 percent of its revenue came from advertising in 2011. However, the vast majority of this was derived from showing ads to users accessing the site through conventional computers – desktops and laptops.
With research firm Javelin Strategy predicting a 40 percent increase in consumer adoption of tablets by 2016, this is a serious challenge to Facebook’s business model. The company will need to develop new revenue streams in order to remain viable, especially now that its stock is being publicly traded, which means that disappointing projections regarding future profits could have drastic ramifications for the business’s financial health.
It’s important for businesses to make investments and operational decisions with a strong focus on the way things will change in the long-term. For any company that lacks the trained financial staff to conduct this sort of analysis, partnering with an interim investment analyst can provide an invaluable aid. And, for firms that are struggling with a particular challenge along the lines of Facebook’s mobile adoption dilemma, working with a financial project consulting service can help ensure that solutions strike a balance between short-term concerns and long-term needs.