
What if Facebook isn’t so special after all? - ssclafani
http://gigaom.com/2012/04/24/what-if-facebook-isnt-so-special-after-all/
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ctdonath
Why is _growth_ so paramount? There comes a point where maintaining stability
seems more sensible - and having a user base of 13% of the world's population
sounds like such a point. Obsession with gathering new users becomes a matter
of diminishing returns, but neglecting existing users can become an
exponential problem (see MySpace). Keep current membership happy and engaged;
long-term growth will follow. I remember some story about a goose and golden
eggs...

~~~
bonafidehan
Growth is so important because that's the reason something is a good
investment vehicle. You invest because you want to increase the amount of
money you put in, not keep it the same.

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.

~~~
awakeasleep
From what I've read, Facebook isn't really interested in cultivating
investment. Look at the small float, and Mark Z's firm control of the company
with over 50% ownership.

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?

~~~
bonafidehan
The value of equity for a public company isn't a metric that only investors
care about. It is the most comprehensive measure of a public company's well-
being. It describes how much money the company is making and it predicts how
much money the company is expected to make in the future.

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.

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georgemcbay
This is completely anecdotal and personally subjective and is only
tangentially related to the topic, but today it dawned on me that Facebook now
has an eerily 'myspace'-esque cesspool feel for me.

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.

~~~
k-mcgrady
That sounds like a problem with your friends, not Facebook. I have never seen
one of those posts on Facebook. I see them all the time on Twitter as they are
retweeted a lot. I have around 150 friends on Facebook, all of whom I now well
'in real life' and 90% of the content I see is interesting and relevant.

~~~
awakeasleep
You might be oversimplifying, because the same thing could have been said
about MySpace.

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.

~~~
k-mcgrady
That's a good point. I've kept my friend list down by actively not accepting
all friend requests and it still astonishes me the reaction some people have
when I 'reject' them. Particularly people I've only met once or twice.

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.

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sek
The basic problem in my opinion is they don't do anything special to
differentiate themselves. Google Maps for example, not a big revenue point but
they claimed leadership in web development trough it. Facebook has so many
engineers and over they years they don't invest in anything else than their
site.

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.

~~~
k-mcgrady
"The Ad's are not targeted at all"

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.

~~~
sek
This is my personal experience, obviously.

Was your campaign successful? I heard bad things about return rates.

~~~
k-mcgrady
I've had mixed results. Sometimes it has worked but other times I think I've
targeted to specifically at good poor results.

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 :)

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stevenj
If Facebook isn't special, the startup industry will be adversely effected.

(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.)

~~~
jasonlotito
Just for perspective, Yahoo is 17 years old. Infer from that what you will.

~~~
stevenj
What was/is Yahoo!?

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.

~~~
hdctambien
Yahoo was a portal back when portals were the thing to be... until they
weren't anymore.

Facebook is a social network site when that's the thing to be... until it
isn't anymore....

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mmurph211
I think the problem Facebook has is once someone uses it for a few years
there's a potential that they'll get sick of it. When someone gets sick of a
site like Facebook they rarely if ever go back. Since it's a social network
that results in a lot of lost value and degrades the experience for other
users who may have friends leaving the site.

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brd
I think Facebook still has lots of opportunities even if its growth stagnates
and its coolness has long since vanished. Considering their size, reach, and
engagement its not unreasonable to think that Facebook could dramatically
expand its ad offerings or attempt to create a new widely adopted
e-currency/e-commerce solution.

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.

~~~
sek
It's extremely difficult to create a new revenue stream as a big company.
Facebook doesn't have a further scalable business model and i don't see them
looking for a new one like Google does. Instagram was a defensive move,
exactly the opposite.

~~~
brd
I agree with everything you've said except "doesn't have a further scalable
business model". They've already created an advertising platform, they've
already got hooks into websites all over the web, is there any reason they
can't expand their ad network to compete directly with Google? I see nothing
stopping them. Advertisers love the demographic information facebook has, they
just can't leverage it appropriately with the limited advertisement offering
facebook provides.

~~~
sek
Ad Sense is not the work horse at Google. I can look up how much percent it is
from total revenue, but it is not that high.

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.

~~~
brd
Sure, the search page is where intent happens so that makes sense. Doing a bit
of digging, it looks like the network generates just shy of a 3rd but 37B/3 is
not really something to scoff at.

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.

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cannuk
An interesting corollary to this piece would be to ask how much time and
effort is Facebook putting into increasing the Average Revenue per User
number? The collective mind of Facebook is smart. They have accomplished quite
a bit and it would be foolish to think they didn't start planning for a
plateau in growth years ago. It really depends on how they increase that ARPU
(like somehow with mobile which they currently make no revenue from). I for
one would not bet against them. This talk of Facebook not being cool anymore
in my mind signals something different now. They are now in essence a utility
(as someone else said ubiquitous) and that is a pretty incredible place to be.

~~~
MatthewPhillips
> (like somehow with mobile which they currently make no revenue from)

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.

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ojr
I like how facebook opensource ringmark (<http://rng.io>) something that is
being moved into W3C , mobile will be better because of facebook, I "manage"
with facebook because it shows how php can scale even though I am aware of
hiphop that takes the php code and turns it into C++

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johnrob
Facebook is an awesome company. Instagram is awesome too. But when someone
buys a 13 person company with no revenue for a billion dollars, it means that
some variable in some equation got corrupted. Most likely that variable was
the 100B valuation of facebook.

~~~
mikejsiegel
What about when someone buys a 65 person company with no (or close to no)
revenue for $1.65 Billion? That's what GOOG did with YouTube, and YouTube
should have at least $1 Billion in revenue this year. They got it cheap in
retrospect.

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tybris
What if Facebook is now being used by nearly all Internet users? Should you
expect it to keep growing? No. Is it bad for business? Hell no.

