What if Facebook isn’t so special after all?
gigaom.com
gigaom.com
Bottom line, the article is talking about growth in revenue and income. The article outlines that growth can come by two ways: growth in the number of users and the growth in $/user. It claims that the former has little upside because of how large Facebook already is. It raises questions about the latter.
In many ways, for the man on the street Facebook isn't a good investment. At the same time, it doesn't seem to be a goal of management to create a company that entices investors. See the line "we make money to create a better product, not create products to make money."
Doesn't that say it all?
E.g., suppose Facebook's equity takes a significant decline in value on the public market: employees become unhappy as the equity component of their compensation declines; Facebook's ability to make large acquisitions becomes more expenseive when its stock is worth less; and its ability to raise capital diminshes because it's more expensive to borrow exactly because their financials aren't as good, according to their stock price.
I personally believe that the long-term goals of investors and founders are very well-aligned. I believe that the common statment by founders nowadays, that they are building a company not for their investors but for their users, will produce the long-term financial results that investors want. It's the short-term goals of investors that conflict with that.
In short, equity isn't this isolated thing that can be happily ignored. It's tied to everything.
So Zuckerberg cashes out at Facebook's peak, leaving the subsequent 'investors' with nowhere to go but down. I wouldn't necessarily put that intention past Zuckerberg, and perhaps a Facebook collapse would be a good thing for openness and interoperability on the web, but isn't it a bit of a self-defeating strategy? Can the hype machine generate enough naive investors to generate a substantial cash-out?
I'm surprised so little is made of dividends. Growth has faster and sexier return, but will fail sooner than long-term steady well-maintained income. $5/user may not be much, but it's better than $4 and falling. Focus on maintaining long term loyalty; there are a lot of newcomers bent on seducing current users away.
The present value of a perpetual annuity (to keep things simple) is C/r where C is the recurring payment you get, and r is the discount rate (or risk inherent in actually getting C). Think of r as an interest rate- you demand a higher one if you invest in a risky company.
Throw in growth and it becomes C/(r-g) where g is the growth rate. As you can see, g is very, very important. Valuing a company is much more complex, but the same basic truth holds - growth is a huge contributor to value.
I login less and less frequently and when I do I'm just overwhelmed by the amount of inane spammy "like this post so this poor child can get surgery" bullshit.
I realize I have control over this stuff, but the amount of it is so overwhelming at this point that I can't be bothered to try to keep on top of it anymore. It feels like email pre-good-spam-filtering.
I log into Facebook less as well, but because it's so ubiquitous that actually going to www.facebook.com and logging in feels like a rarity.
You said it may be a problem with the friends you chose, which is correct, but when a social net grows too large, real life social pressures start inducing you to include people who aren't interesting, and that has an overall negative effect on the network. So the choice end up being between manually filtering spam and snubbing people who you have to interact with on a daily basis.
It also depends on the type of people you friend. For example very active internet users (especially geeks) are more likely to post links to tech stories, use the subscriber system etc. Most people I know keep everything private, don't share links (apart from the odd YouTube video), and only share interesting things about their lives.
They have a Login system, that's nice but there are a dozen of services out there now. There is even an own protocol for that, OAuth what everybody can use. Did they even try something else? I don't see a real strategy, or vision in their current behavior. The like button was nice to get more data, but that doesn't seem to be the Golden Cow.
The Ad's are not targeted at all, they only use the fact that i am male and single. The ad's are similar to porn sites ("Find hot woman now...."), who can also be really sure that their users are male and probably single.
Have you ever run an ad on Facebook? The level of detail you can get into when targeting is incredible. Because people have liked places, added their location etc. you can target an ad at people who live in a specific city and like x.
e.g. If I was selling tickets to a Foo Fighters concert in Toronto I could target the ad so only people who live in Toronto AND have liked the Foo Fighters page get shown the ad.
Was your campaign successful? I heard bad things about return rates.
As a Facebook user most of the ads I see are quite relevant. I think it depends on how many pages you've liked. I also close and mark ads that aren't relevant to me which might help.
Right now it is showing me:
- A HMTL5 course - A newly released album that interests me - A guitar player I might be interested in (I was) - A poker game & free chips offer (probably because I play Poker games on Facebook) - A tax ad as it is roughly tax time
Admittedly there are also two that aren't at all relevant but considering the fact I never see relevant Google ads I think Facebook is doing a good job with ads.
(I know this makes me sound like a Facebook evangelist, I promise I'm not :)
I never "liked" anything for a while and I was getting those same generic ads (because they didn't have enough data to target me) but once I gave them the data they wanted, I started seeing ads for things that I am actually interested in (comedians I like coming to my city, adventure races in the area, movies that are opening soon). I find the ads on Facebook to be way better than the ads on Google (I actually click and buy things with ads from Facebook).
However, if you go crazy and click the "like" button every time you see it, you will go back to seeing irrelevant ads.
(I think Facebook's special. I think it'll be alive and well 20 years from now.)
Edit: as it's often said, venture capital relies on home runs. If the biggest home run of all (Facebook) turns out to be a foul ball, and then an out, I think venture capital will contract; especially consumer tech. (Again, I think Facebook will be fine in the long-run, provided Zuck stays its CEO.)
Was it a search engine? Was it a portal?
Is it a news site? Is it a media site? Is it a portal? Is it a tech company?
I think Facebook will always be a social network that's focused on building its core product(s) with good technical people.
Facebook is a social network site when that's the thing to be... until it isn't anymore....
Shouldn't discourage anyone from doing a web startup though, people are always going to want those sorts of social sharing sites, just maybe not that one.
Either of these is definitely within their reach, the issue they currently have is that, although they have tons of user data, they have little in the way of user intent and without that they don't have any good ways to monetize their user base. If they can get at the intent, they have a gold mine. Whether they do that by getting involved directly in the transaction or by building a more ubiquitous ad network remains to be seen.
Edit: I looked it up, everything they call Google Network (probably Doubleclick, Youtube, AdSense) is less that half of what the search engine makes. It has also a lower margin i assume, i don't have Google shares otherwise i would know the details. If you think about what you said, competing directly with Google means having a better product.
I would imagine from a marketers perspective there are times when Facebook would have a better offering. I don't see why there has to be a black & white distinction between Google's and a potential Facebook ad network. Consider Groupon, there are times when the model makes sense (experience based businesses) and times when it doesn't (restaurants). Even if Facebook rolled out their own network and only managed to get another 5 billion out of it, thats still a doubling of their revenue.
I admit that after looking at the numbers, its not nearly as rosy as it might have seemed on the outset. But then again, I never had any intention of buying stock anyway.
That's not true. They are collecting data about you while you are on mobile and using it to feed their ad algorithms for when you are on desktop. Even if you are the super rare person who never uses Facebook from a browser, your data is useful because it influences what your friends see and click on, which influences advertising for them.