The Case for Facebook

The interesting article kindly submitted here builds its argument on this observation: "Yet Facebook is still the world's largest social media site with more than 900 million users. And most importantly: Many of those people still visit the site each and every day, regardless of grumbling from cynics or short-term price fluctuations." The structure of the article's rationale for being bullish on Facebook is all keyed to this. So I read the article carefully to see if there would be any mention at all of AOL, the previous company about which comparable claims were made. In the living memory of many people who used and have now left AOL (like me), the author doesn't even bring up AOL as an example. I'm sure that committed, loyal users who see their friends every day on an online network can nonetheless choose to leave that network--I've seen it done.

I agree with the author that Facebook's imposition of a "house style" on user profile pages was a huge advantage of Facebook over MySpace. That spared Facebook from being butt-ugly on most pages, and probably also reduces server load at scale. That Facebook is international is also a strength of Facebook--I have Facebook friends in several other countries, and I interact with them now more than I ever have before since we went off to separate countries. But to this day China is blocking Facebook, and other countries still have the technical means to restrict use of Facebook.

But user count isn't the key issue for a business. Revenue and eventually earnings (profits) are the key issues. All of my interactions on Facebook don't monetize Facebook. Facebook is under governmental supervision both in the United States and in the EU about how it uses user-supplied data to monetize. I read Facebook pages with AdBlock and F. B. Purity installed--I find Facebook disgusting when I view it on other computers. I can't think of any way that Facebook can monetize my share of the load on its servers without turning me off, and many of my friends think the same way. We are happy to free-ride on the gullibility of Facebook's investors (what consumer doesn't like a good deal?) but if Facebook seriously figures out how to monetize its full user base in a way that provides positive return on investment for Facebook's investors, that is likely to be through corporate behavior that turns off Facebook's users and drives them away. It's been done before, and I expect it will happen again.

I don't buy the article's claim that Facebook is a "natural monopoly". A natural monopoly would be something like an electric utility, which would be very hard to compete with since you'd have to build out a very expensive alternate network of power lines before you could even start selling.

So let's look at what business Facebook is in and whether they have a monopoly in that market. Facebook is not in the business of running a social network -- most of their revenue comes from selling ads. Their customers are advertisers, not their users. Their competitor is not really the puny Google Plus, it's the mighty Google AdWords. And Google is currently beating them in that market, so no monopoly there.

Number of minutes spent on the site per month is the wrong metric to measure Facebook's success by. What really matters in both Facebook's and Google's business models is ad revenue per dollar spent on operations.

"One in every five page views on the Internet is a Facebook page. If you think the Internet is valuable, then you implicitly think Facebook is valuable, too."

Holy logical fallacy, Batman.

I would just like to thank the OP and the Atlantic for including a tl;dr section, is this becoming standard practice in our 140 character world?

The problem with the Facebook stock, is its valuation in relation to growth prospects / concerns. It's as simple as that.

Facebook maxed out the money they could raise on the IPO, and the price fell afterward accordingly. It's better for the company long term that they did that.

It's a long race they're in.

A hundred billion was way too much. As of right now, though, it's valued at $57.66 billion ($27 per share) and I'm starting to think it may be worth buying while the sentiment on it remains so negative.

Maybe not $27, maybe $25, or $20... there's gotta be some sort of floor on the value though.

This author sounds a little naive re: technology.

Perhaps he should examine some of the Facebook publicly available scans that have been done by "academic researchers", e.g., in South Korea. It is not rocket science to crawl Facebook.

Facebook's data is accessible. As is any website's back-end database. You are kidding yourself if like the author you think you can put something like Facebook on the public internet and have it be "private". If people with the skills -- and there are plenty of them; surprise, they don't all work at Facebbok -- put in the effort they can get the data. All they need is a reason/motivation to do so.

But let's have some more embarassing "tech journalism" (uninformed pontification) from a once respected journal. Put more nails in the coffin of the notion of "professional journalism".