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Facebook Is Worthless

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3

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Original Post (Facebook Is Worthless):

Salacious headline?  Yes.  True?  Also yes.

This is not a slam against the EXTREME popularity and unprecedented GROWTH story that is Facebook.  This is a reality check of an unsustainable business model.

Much like a homeowner who can no longer afford an overinflated house purchased during the height of the bubble and decides to walk away, Facebook (with claims that it will hit ONE BILLION users in the not too distant future) has given it all away for free for far to long to change.

But change it must or Facebook Is Worthless.

Imagine the cable networks at their inception (especially premium channels like HBO) giving the channel to anyone for free at the beginning and then trying to convince customers to pay down the line.  It’s a daunting task.  One that Hulu is going through now – but they made the hard decision, and even though traffic and video streams will certainly fall, it will soon be profitable because it wasn’t too late to right the ship.

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3Imagine Disney/Pixar putting out Toy Story 3 for free in theaters and trying to make up their costs by throwing up billboards along the walls.  What kind of idiot would do that?  It would never be considered.

People love (and some actually depend on) Facebook, but it is too late to right the ship – and not just because no one cares or pays any attention to the banner ads that are thrown up against everyone’s status updates.  It’s because people are starting to get really bored with it.

There are some late adapters that are still in the ecstasy phase of seeing their old high school friends as they look today (Facebook has ruined surprise factor of high school reunions forever, but I digress), but for the most part – at least in my case – most of my Facebook friends have stopped participating.  They will pop on once a day or so just to see if anyone has posted any new drunken pictures or family photos of the new baby, but that’s about it.

My Facebook experience now is basically the same five people posting the same boring crap.

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3

The Bored Office Worker who posts about “needing coffee” – and “can’t wait for Happy Hour!”

The Super Mom who claims every morning – “Went to 8 museums adn made banana bread all before 10am!  My kids are awesome and sooooo funny!”

The Quoter who searches quotation websites looking for some daily affirmation that will get about 15 “Likes” and a few “I’m going to use that!” replies.

The Reviewer who writes stuff like “Smoke Monster?  Shit Monster if you ask me!”

The Pissed Off Traveler with daily pearls like “10 hours on the tarmac!” and “Yet another delay, thank you American Airlines!”

And that’s about it.  Every day, the same five people and I have over 300 Facebook friends (even though I only see about three friends actually in person in any given month).

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3The valuation on Facebook is so high that no one could possibly acquire it now (not even my employer, the insanely deep-pocketed Manka Bros. Studios) especially considering there is really no monetary growth story.

As it becomes more of a digital dumping ground, costs continue to rise.  It has peaked as a global fascination.  Check the value of Bebo, Myspace, Friendster, etc. and you’ll see the future of Facebook.  Even though Mark Zuckerberg claims he’s different than all the others.

So here’s what Facebook needs to do – start charging every current or new user $0.99/month.  Just ninety-nine cents per user per month to use all the features they currently use.  New services may make it possible to bump that up to a premium fee down the line.

Millions will leave and start some “Facebook Should Be Free” movement, but other millions (like my five daily posters who feel they need to be heard) will definitely pay.  Because $0.99 is nothing.  It’s the purchase price of a pig on Farmville.  There will still be advertising and cross-promotional opportunities and corporate sponsorships, etc. – multi revenue streams.

But the free culture has to change or Facebook is Worthless.

Deep down, at least to me, this seems to be the reason the IPO hasn’t happened.  Zuckerberg says he’s not interested and will delay the IPO as long as possible.  Yeah, because it’s a $15 billion company (so they say) with costs that exceed revenue – and no signs of that ever changing.

I wouldn’t be interested in an IPO either.

Someone enlighten me and correct my ignorance.

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3Jill Kennedy – OnMedea

Permanent link to this article: http://mankabros.com/blogs/onmedea/2010/07/01/facebook-is-worthless/

129 comments

19 pings

  1. Jack Kirby says:

    Google have been getting bad press again for collecting emails, passwords, personal details from unprotected wifi setups while they were trawling for Street View. That was straight-up wrong of them and it’s becoming more difficult to get what they mean now by ‘do no evil’…

  2. Tiara Karmel says:

    it would seem Facebook has taken another step to engage it’s audience within the trivial and banal. Most of the the time visitors do not even need to use the keyboard? I fear that the final product of social media (that I adore) will of course be a generation of super self-absorbed lazy people.

  3. R. Viharo says:

    In the spirit of your article – Imagine the audacity of say, Google who actually gave search and gmail away for FREE to millions of users – and then turn around and creating a business model out of it that brings in billions.

    Rather, hasn’t Google ever considered simply charging people .99 cents a month/year to use their search engine?

    1. Jill Kennedy says:

      Exactly, R. Viharo – that’s the point. They NEED to start charging but they CAN’T start charging because of user revolt – thus, they are on the road to becoming worthless. It’s a real Catch 22. Charging is the only way they survive – but they would lose soooo many users but even with the loss they could be profitable.

  4. EG says:

    “Someone enlighten me and correct my ignorance.”

    Your conclusions are ALL wrong. It’s not your fault, you’re just not a business person.

    Advertiser revenue greatly outweighs subscription revenue. This fundamental business principle drives countless comp publications and free online subscription services.

    It’s not rocket science. Just business 101. You should read up.

    1. Jill Kennedy says:

      EG,

      I not saying it should be either subscription or advertising – it should be dual revenue streams like cable networks get. Why is NBC worth – $690 million (that’s negative) – or worthless? But Bravo, USA, etc. – other channels in the NBC portfolio with a fraction of the ratings – worth billions? Multiple revenue streams. If FB doesn’t go that route… Worthless.

  5. EG says:

    “I not saying it should be either subscription or advertising – it should be dual revenue streams like cable networks get. Why is NBC worth – $690 million (that’s negative) – or worthless? But Bravo, USA, etc. – other channels in the NBC portfolio with a fraction of the ratings – worth billions? Multiple revenue streams. If FB doesn’t go that route… Worthless.”

    Jill what you’re suggesting is impossible. Like you said, it’s impossible for facebook to start charging subs now and if they had started charging for subs at it’s inception it never would have reached the “critical mass” necessary for it to go viral and grow to the mammoth proportions that it is now.

    The principle is: If you build it they (Advertiser dollars) will come. And market value, although not as valuable as cash on hand, is not worthless.

    1. Johnnyboy says:

      “If you build it they (Advertiser dollars) will come.”

      The problem with this theory is that when the next cool thing comes along and all these users follow (a la Myspace and Friendster before it) the advertisers will walk right out the door…thereby rending Facebook, as Jill points out, worthless.

      FB has raised close to a billion dollars…no way will the ever last long enough to offer their investors a lasting ROI.

  6. EG says:

    Just one more thought. Social media marketing is an emergent phenomenon. No one knows exactly what it will morph into. But we do know that email marketing and SEO is still #1 on the web for advertisers. But what if Facebook were to successfully integrate all the different messaging vehicles into a single service whose portal goes right through them? What would this mean for web marketing? What are the possibilities?

    Well , this is what they are attempting with their newly announced messaging services. It’s not a done deal by any stretch, especially since google wave failed miserably not too long ago. But facebook has a “coolness” factor that google doesn’t and there are several hundred million users that would probably agree with me even though they might not want to admit it…

    I for one am curious to see how this is going to play out…

  7. Age of Adz says:

    Couln’t agree more! NIce article.

    I hate facebook. Never used it once in fact. And I am the same age as Mr. Zuck. I could never understand why folks jumped on it so damn fast. Seemed like such a college thing…for pathetic losers…

    Anyway, Facebook is in trouble. Groupon has a better business, and so does Zynga!

    Google made more PROFITS in 1 quarter than facebook in revenue for a year? Laughable.

    Facebook isn’t a technology company like Google or Apple. It is a popularity and mass marketing website. What a joke! They had better learn to turn a better profit. Fad, fad, and fad.

    People should watch the documentary “We live in public”.

  8. Don says:

    What will bring the gradual demise of facebook, is its need to control, control as in acquiring user data and information and future unbridled use of such data and its new move towards controlling who you can sent friend invites to or wanna be friends with. Let the other party decides, social networks users do not need or want a chaperon. When facebook started there was no such emphasis on control, you upload what you like and even if by uploading pics on their servers gave them the right to use your data etc it wasnt in your face, now its in your face and that made a lot of users worry and wonder and of course as already mentioned there is nothing much going on there nowadays, its just the same old stuff – people lying about how happy their lives are, with a hefty mix and dose of exhibitionism re pics etc. Its obvious that Facebook has reached its peak and once you reach your peak, its all downhill from there, anyone remember hi5.com lol

  9. J says:

    I don’t think you have a solid understanding of what FB is capable of. Let me draw out some examples:

    -Zynga is a company that has almost exclusively grown in the ecosystem of the Facebook Platform
    -Zynga has $600+ annual revenue and a ~3 billion dollar market cap
    -Facebook takes a cut of every developers revenue (about 30 percent I believe)
    -Zynga is one of 2.5 million developers on the Facebook platform (and not the only FB developer with a multibillion dollar market cap)

    -FB has ownership of the social graph- which is invaluable and priceless
    -Social graph is allowing FB to extend its reaches across the internet with FB Connect, Instant Personalization, and social plugins
    -One day(sort of already is) FB plugins, etc. will be ubquitous across the internet

    -FB Credits has incredible potential, I suggest you read up on it

    In the end, the potential and possibilities for revenue stream are endless. This article is very shortsighted, and I assume you’re not a developer or do much research in the startup/silicon valley scene.

    1. Jill Kennedy says:

      J, seriously? Endless possibilities for revenue? Endless? Let’s see it. If little Farmville characters can make a company worth $3 billion – then imagine what the Avatar game will be? Maybe then Zynga will be worth $50 billion! Or one thousand Billion! You’re just throwing shit numbers out there that are, in the long run, going to be meaningless. FB is a bubble and MZ and company better cash out and start the next big thing. Have you not noticed how people spending less and less time on FB. I know you work there, so you’re on it constantly. Most are starting to get bored – thus the constant redesigns and product placement – anything to keep people on the site longer before the bottom falls out.

  10. Mike says:

    Hi Jill, I came across the article and just wondering if you still feel the same way?

    Facebook is making Facebook Credits mandatory for every developer on their platform, meaning 30% of all revenues. This amounts to several million dollars per day in their pockets. To say nothing of the ad revenues, which are likely higher than that. Saying “worthless” is pretty tough to defend these days.

    I can’t help but feel that this article was written as a personal vendetta on a bad day. Sorry, but most of my friends on Facebook seem to have finally “gotten it” and are posting fun, interesting, engaging material there hourly. I took a long hiatus from Facebook because of the drivel I saw, but that’s completely turned around. Or, I just have interesting friends. I’m not a Facebook fanboy by any stretch, just seeing a lot of value there lately, both personally and from a business standpoint.

    1. Jill Kennedy says:

      Hey Mike,

      Definitely not a personal vendetta. I don’t care either way if it makes it or not. I do there should be a re-forecasting of this story to reflect where we sit today. It is becoming apparent that they are actually making money. I’ll be curious to see how it all goes post-IPO. But I definitely think I wouldn’t be as doom and gloom on it if I wrote it today (though I would have the same feelings about the people who post regularly. Unlike you, my friends are as mundane as every… off the record.)

      Last summer, all I saw on the site was huge costs, ineffective ads and an unengaged user base – which only pointed me to the “worthless” conclusion. They may, in fact, be starting to prove me wrong.

  11. pedro says:

    it will only have lots of users because you cannot delete your own account. i’ve tried.

  12. bob says:

    you sir, are an idiot

    1. Jill Kennedy says:

      Seriously, Bob? If you think Facebook should be worth the market caps of Time Warner and News Corp combined… then you are the idiot.

  13. j says:

    Isn’t it Facebook’s long-term intent to simply sell user information?

  14. shen says:

    i think shes pissed she didnt get her own movie

    1. Jill Kennedy says:

      Definitely pissed.

  15. Heide Diblase says:

    you balling but you work at a fast food place

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