Facebook Hemorrhaging Cash, Runs To Dubai For Money | Hacker News Reader

Facebook Hemorrhaging Cash, Runs To Dubai For Money

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22 pointsjmorin00745 comments

I've never really understood Facebook from the business side at all. I generally like the service they offer (generally, though it is really lacking interesting and helpful aspects) but I've never understood their thinking on business moves. They've got a very popular software platform, one of the most visited sites in the world and rising, and some how 700 people can't figure out how to make a buck.

I agree with most of the other people here... Zuckerberg promises a business plan in 3 years? What the hell? I can see having your product and company out there and be selling things or providing a service and not necessary have the business plan down and taking some time to find one that really does work well, but when you have 700 people, corporate offices, and a widely popular product/service, a business plan seems to me to be something you put at the front of the line. Not: "hmm, we'll get to it later, lets just enjoy the fame!"

Most of what goes on at Facebook could be ran by 70 really good people. That's not including investors/shareholders at all. That's 70 people that are just in charge, server/network managers, system engineers, accounting (do they need one?), and marketing. It appears Facebook got the idea that it needed to have its own in-house Microsoft Research or something.

If they can cut jobs rather than raise (too much) more money then they probably should.

Spewing money that fast is BAD all round (and no amount of shoring investment will help long term). Either they need 2 or 3 years capital or they need it fixed now...

Cut hard and deep now, refocus, reassess and build on current revenue streams.

But they wont....

I realize that Facebook gets enormous amounts of traffic, and so requires the resources for scaling/high availability and all that. But how in the world have they gone through most of $500 million? What the hell are they doing over there?

They do have ~700 employees (http://www.crunchbase.com/company/facebook)...

That's sort of what I'm getting at. Why do they need so many resources? I mean, looking at the software and its requirements, I don't see the necessity.

I bet their revenue projections were based upon insane levels of growth (internal and external). Even if the economy was in better shape it would have been hard to reach profitability.

My guess is they're a victim of cargo cult thinking: Hugely successful companies have lots of employees and spiffy offices, right?

Yeah. And Google has done the exact same thing. They're just fortunate that their business model is so much better that it can support their massively inflated head count. At least with Google it kind of makes sense in an evil way: hire every programmer who could be a serious competitor.

Difference being that Google recognizes that one of their strongest growth areas is capitalizing on innovative ideas. Gmail, Apps, Gtalk, Chrome... all innovations that build the company.

I'm not sure what facebook has done, or whether this should really be what the focus on, to be honest.

Perhaps also with some empire-building thrown in? Maybe everyone wants a promotion in recognition of their great work, so they need to hire new employees to work under them. I have seen hiring decisions made for that reason before.

Have you noticed how fast,snappy and easy it is to access photos and albums on facebook? for one...

The hard part is molding the social behavior into something that adds a lot of value to the users and eventually to Facebook shareholders. How hard is that?

I remember a thread here in HN asking how much time would you need to build a site like Hacker News. Lots of people said something like "a week, top". pg said something like "one year".

It's always been interesting to hear people's responses to "how long do you think it would take to duplicate Facebook?" In general, the more experience/knowledge the person has, the longer they think it would take...

I'd rather be http://www.crunchbase.com/company/craigslist

Doing what, exactly?

As impressive as Facebook is, I truly think it is ridiculous that they have ~800 employees. How many does Craigslist have? Wikipedia? Granted, FB needs a few more to manage ad sales/delivery, but... 800?

That's one of the advantages of simplicity: far lower overhead.

craigslist is very simple, so they have something like 23 employees.

25 according to CrunchBase.

Wikipedia seems like only have 5 programmers. Am I correct?

Facebook was hell-bent to become the new google and built an organization to match. In fact, the hype was promoting facebook as the successor in the ibm->microsoft->google line. Thing is, google did not begin to be 'the new' anything. And with the downturn setting in, Facebook may have to get its focus back or we may be talking about it as 'remember that website that had tons of users and no revenue' in a few years.

Lots of Facebook's man power is in customer support (which also involves community moderation). When you have more than a hundred million users worldwide, there's a lot of work to go around in that area. And I guess they're not outsourcing much of it.

I wonder who has more customer support problems/issues to deal with: Craigslist vs Wikipedia vs Facebook?

Well, Wikipedia has an army of rabid, foaming-at-the-mouth volunteer deletionists, so I don't think they need much staff to moderate...

Unlike Wikipedia and Craigslist, Facebook has zero moderation by the actual users. In fact, I think the only time they've asked users to do anything for them was the translation effort. Given the success of that, maybe they'll move to more moderation by the community in the future. It's certainly cheaper...

and 10,000+ servers!

why is it taking these guys so long to come up with a business plan? Why is Zuckerberg promising one in 3 years, and not coming up with one now. Hell they have 700 people, not one of them can figure out how to monetize 1 of the most visited sites in the world?

Maybe it's a really hard problem that we don't fully understand.

EDIT: deleted unnecessary nagging

Or maybe it's a really hard problem that we don't fully understand.

The problem seems simple in one sense: uncontrolled growth, no?

Their real problem is not the burn rate but that they can't bring in reasonable revenue (for the traffic they have).

Here is an interesting article on how other social networks are doing:

http://www.usatoday.com/tech/techinvestor/industry/2008-05-1...

I think what they're doing is daring, but it makes sense. Creating a business plan narrows the companies options; as long as they don't have one, they're flexible enough to bring in new users (and keep old users coming back), which could open up more possibilities.

If Zuck had monetized when Facebook was at Harvard, Facebook would have been cash-flow positive. And he would have graduated with a few thousand dollars extra in the bank, rather than dropping out and ending up with a billion-something net worth.

Paper net worth.

The kind represented by stock certificates, as opposed to the kind represented by green pieces of...

Indeed. The same kind of net worth represented by Pokemon cards, Beanie Babies, and my vintage Flooz collection.*

(*I don't actually have any Flooz. Oh, but if it were so....)

I'll trade you some of my stock certificates for some of your green pieces of....

I bet I heard he took out $40M in cash after selling some of his equity a year or so ago.

Can facebook possibly make as much money as has been invested in them?

Sorry for stating the obvious, but they generally have to show that they can make the money back (about 10x) to investors before taking the money... its much harder to comment on whether they can or not when your not involved with the company.

Sorry for stating the obvious, but VC is a big risk that only rarely pays off. The VC bets on Facebook weren't because of a business model they have, it was on that they will be able to find one that works on a huge scale. Sort of like Google and AdWords. It's all unproven at the moment and the valuations were simply based on the number of users.

That type of thinking led to the first dot-bomb, the housing boom/bust, and hell, even the depression.

Lot's of people do very stupid things.

Rather a spun title.

Hear that? It's the ghost of .com past sneaking up on you... timing might be right too. :-)

Apparently Zuckerberg didn't read the Sequoia meeting notes ...

Or he did, which is why he's trying to raise money now.

They need to hire Paul Bucheit. Hell, he came up with adwords for google, he can do it again.

Someone please tell me what is Facebook's USP?

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