The startup instruction booklet, powered by my life (and other things I think about).
Wednesday, May 28, 2008
Facebook - Show me the Money?
There has been plenty written about Facebook - both good and bad. But since I touched on it briefly in my last post, I wanted to follow-up. Sure, Facebook is a great app. It's brought me back in touch with countless people I'd probably never have spoken to again. It's also great for sharing your life with others, if those people care. It's a great place to waste time too. My roommate, for one, spends hours hanging out on it. I'm not sure what he does, but he's on there.
There are lots of great apps online, but there's a big difference between a great app and a great company. In fact, just last week, a friend had recounted a story of a guy who came in to pitch his firm. My friend loved the app, but the problem was, there wasn't much of a company to be built. He recommended the guy just focus on making some money with it, but to rethink his strategy in terms of building a company.
If you look at Facebook, where are they going to make money? Sure, you can see they can make money advertising, like everyone does, but there's one big difference between a search engine (like Google) and a social network. You don't visit a social network to make purchases. And that's a HUGE point. You do go to Google looking to make purchases. And that's where the relevance and the success of their ads come in. I've clicked on lots of ads on Google but I've gotta say, I've never even intended to click an ad on Facebook. It's just not the normal interaction or consumer experience. Can that change? Sure. Can their targeting get better? Sure. But its going to be a long steep road, one that I'm not so sure they can climb.
How about that Beacon debacle? I mean seriously... did FB really think I wanted anyone seeing what I bought on Blockbuster. If you don't care about a movie, how about some embarrassing things you've bought in the past? How about jock itch cream, herpes medication, hemorrhoids, porn, women's underwear (that your girlfriend never received)? FYI - these are just examples... not actual purchases, so don't get excited.
There's no instance where I'd be comfortable knowing my purchases were being used to provide recommendations to others WITHOUT my express consent EACH and EVERY time. One way they could get around this is by showing friends some ads based on things I've bought, but not using my name. Still - I don't think that's going to bring in the cash.
Facebook is also going to have to deal with the inevitable. There are going to be other social networks that come and go, other new technologies, and fickle users. There's no allegiance in the online world. I've already seen a huge decline in the use of FB just between my friends. Facebook fatigue its called. I personally use the site less and less. And I've been receiving friend requests from people I know that aren't even my friends... so the utility of this service may not last forever. The apps? I'm so damn sick of people throwing sheep at me. And Sexy Friends? If that's not spam, I don't know what the hell is. Just add that app if you want to see what I'm talking about.
Google works so well because it's simple and effective. Facebook is a complex beast. I'm not saying Google can't be replaced either, but if I were a betting man, I'd stick with Google.
15B? That's such a ridiculous valuation that I don't even know where to begin. And the fact that Microsoft invested in them at that valuation just reaffirms my belief that Microsoft doesn't know what the hell it's doing anymore.
I never thought I'd say this as a PC guy... but I'm slowly appreciating all things Apple. I may even get an iPhone when the new one comes out next month.
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I agree with everything you talked about in this post (very surprisingly huh!) From early on, I recognize that Facebook is nothing but a fad that lasted for a long long time. Think Friendster. As I've always talked to my friends about, Facebook has no solid "business" model, it being having a solid product/service to offer other than based on an advertising model. If there is another website that can attract just as many users, advertisers will for sure abandon the Facebook ship.
The part where you talked about Facebook's current valuation is also very true. The main reason that Facebook could be valued so high is because Microsoft had given facebook a value and certainly we all know that Microsoft is desperate to search for some other avenues to make money.
One of the questions I received from investors is that "can consumers live without your service?". Well, I think the answer for Facebook is an obvious "Yes". I used to be a MySpace addict, but as soon as Facebook came along, I am out of it- just like that!
Wow, you agreed? Definitely a surprise! I have a few other companies who's valuations I'm shocked about too. Some that were in the news today. I'll post about it later this week.
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