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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.
Imagine 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.
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).
The 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.
Jill Kennedy – OnMedea
Great post, Jill. Facebook has been worthless to me for the past year. I’ve gone on it maybe 3 or 4 times. I’m mostly on Picasa now for photos. I don’t need status updates from friends I haven’t talked to in 5 years.
How can you say its worthless? I’ll take that kind of worthless anyday. Most of my friends would leave if they were forced to charged, but when you have that many eyeballs, it’s never a bad thing.
Could I get you to change this story for 1 MILLION DOLLARS?! I think I could… BEEYATCH!
Facebook has been cash flow positive for about year.
Charging money would be incredibly short-sighted. I think the author should stick to her domain of expertise.
Hey ‘funny’… I think it’s incredibly short-sighted to be so much in denial about the future. Once advertisers realize they aren’t getting much bang for the bucks, they are going to retreat. The Facebook fan base is getting less and less passionate about going on every day and seeing the same boring status updates and Quotes of the Day. I do agree that convincing the faithful to pay will be very difficult and I certainly won’t do it, but they are going to have to do something or risk becoming WORTHLESS.
This post is worthless… Internet Marketers making more money out of facebook than you ever saw… and your post is just waste of your time, that costs nothing… if you hate facebook it doesn’t mean that others do.. Marketers making killing there because people like it, people like facebook. Facebook won’t vanish because it’s free. Mark Z. is just a nerd, he’s not a buisnessman..
And about 0.99 fee, it’s just plain stupid idea… It will kill facebook and earnings.. So just cut the crap, it’s not even funny
fun to look back and say, “doh!”
Internet Marketers are making a killing. Facebook is not making a killing. If I’m a shareholder in Facebook I could care less what the internet marketers are making on my back. At some point, like MySpace (where internet marketers made a killing as well) the actual free website is going to have to make money. And free websites, especially one with this kind of massive scale, do not make money. Let’s just see how AOL earnings go.
Is that really Mark Zuckerberg? If so, I like your email address.
As we approach this country’s 234th birthday can we all agree that the real enemy is the British. Not Facebook.
No one is going to pay $10 per month for watching content on Hulu that is aired for free and also available directly from ABC, FOX, etc own website. In the time it takes me to sit through three of their commercials I could have torrent-ed the entire seasons worth of shows already. For $10 a month anyone with two brain cells to rub together would head over to netflix streaming.. and they don’t have annoying commercials.. Hulu has jumped the shark. Monetization on the internet isn’t easy. The only reason anyone visits Hulu is because it WAS free.
It seems every company these days are trying to nickle and dime its customers to death.. They must think money grows on trees or something..
First one has to pay the rent or mortgage to have the privilege of using electricity, and then the fork over hard earn cash to the elec co. to pay the electricity bill to have the privilege of using the internet, then we have to cut a check to our Internet Service Providers (not to mention the cost of the computer itself, and the cost of the operating system that runs the computer) in order to have internets at all.. Once we are actually on the internet we are bombarded with adsense this, adwords that, every website trying to get impressions and maximize clicks, and not to mention companies like Google data-mining our private information and selling it wholesale to the CIA/NSA, and now we have to pay for services that were traditionally free? and STILL be subjected to advertisements? What has the world come to?
Pandora, Hulu, Vimeo, it seems everyone and their dog wants to charge and double, triple dip these days.
The best example is ooma. The alleged so-called “free internet phone service” where you shell out upfront investment of $400 and then enjoy “free phone calls forever”..
Turns out the device has an average life span of 4 years.. There is a $19.99 yearly “governmental recovery fee”, and for anymore more than basic voip features (such as caller ID, call waiting) you have to pay a premium service of additional $9.99 a month, and there is still charges for international calling by the minute, and on top of all of that if you want to port your landline number over (which was the whole point in the first place — to save on traditional phone costs) that’s another $49.99.. want another handset? another $49.99
Hefty upfront Ooma device cost + Annual governmental and regulatory recovery fee + monthly premium subscription + international calling charges + porting charges ==
WAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHH!
It’s turning out the internet isn’t saving the consumer any time or money and doesn’t benefit me the end user at all..
I’d be a lot more worried about Google than facebook.. Between Gmail, Youtube, Google Chrome Browser, Google OS, Google Phone, Android, Google Books, Google Editions, Google Wave, Buzz, Google Me, Google Earth/Streetview/Maps, Google Air Travel, Google Admob, Adsense, Adwords, Analytics, Google Apps, Google Docs Online, Google Music Service, Google TV, and its other nefarious expansion plans such as getting into supplying electricity and becoming an ISP and a secret adjust of the NSA.. I’d say Google has all of us by the balls.. Once they have taken over the “information” they are moving to take over the financial/monetary/economic side of things by being the facilitator of money rather than just information.. Google knows the ENTIRE advertising model is doomed to fail and unsustainable.. so it is trying to capture as much user base and as broadly and rapidly as possible, to create a need and addiction so that when all its competitors are put out of business (Google devalues everything it touches and its ad business model means due to economics of scale there can only be one company like Google.. everyone else gets screwed..) it can do an about face and complete 180 and starting charging for Youtube, Gmail, Google Me, they will probably start some micropayment system and try to be the default for all online purchases and even charge you a dime per google search..
This is where it is really headed.. Facebook is a joke. Google is the true evil.
Thanks for the post, Bo. for some reason, and I’m not sure what that is, Google doesn’t bother me like it does you. Perhaps they are evil but they actually started their company with a very strong business model that was quickly quantified and became a Wall Street darling for 2-3 years or so. Facebook is just arrogant in its approach to business and it just creates this horribly mundane experience of your friends posting about how great their lives are when it’s really just a lie. People are getting so bored with it. Google, for me, you go to find something on the internet. I don’t have a need to dig that deep – so if they’re manipulating me a little, I don’t feel it. I believe that I’m getting a decent search. Their financial portfolio stuff is great. Google Analytics is great for the website. I don’t have the same problem. But I know you’re not alone.
Google knows that its a “one hit phony”.. 98% of all GOOG revenues still comes from adwords. Google is no more a technology company or “search engine” than it is a marketing company. All its other products are just to get customers locked into Google’s domain so it can continue to make money OFF of us (both the content providers AND the end users of the web) at the expense of everyone and everything else. Like I said before, Google devalues everything it touches (newspapers -> google news, books-> google books, phone calls -> google voice, etc) and their entire model is to offer a sub-par or marginal product, give it away for free (and label it “beta” in perpetuity) to garner its userbase and sell ads with its platforms.
The general trend and shift away from full tower desktops to laptops and now more compact and mobile form factors such as netbooks, and tablets and even smaller hand held computing devices like the all-in-one smart phones means the future of Google is threatened. Desktops will never go away and more and more people are spending time on their cell phones, casually surging, casually searching.. This has already caused the demise of “blogging” (blogspot), and even killed off “emailing” (gmail).. Who needs to blog when everyone can txt to twitter a 150char soundbite or email when txting replaces it entirely?
Instead of 19″ monitors most people are spending more time on their 3.5″ iphones. Google is caught in a catch 22.. it has to position itself for the inevitable shift to small devices and yet it makes the most money when its userbase is working off larger monitors. Even if Google succeeds with Android/Admob and outst the iphone/apple business model it will have done nothing more than just also cannibalize its own money making machine of serving boatloads of ads to the desktop market. Cellphones just can’t display that much ads, impressions go down the toilet, CPC goes up the roof, everybody loses.. including the end user and consumer because without means to adequately “subsidize” the many free online services today (which are propped up by large and plentiful ads displays) we are going to end up having to pay for ALL online services, nothing will remain free..
Google knows this, so that is why they are shifting the paradigm from within the company.. “Advertising” is what made Google, but it can not be Google’s future if it wants to survive. It has to become a “real” company, sell real services, produce real stuff. That is why it is trying to partner with manufacturers and content providers to sell its own Google TV setupbox, recently it tried (and failed) to sells it own Gphone/NexusOne Google cell phone directly to consumers, it has invested in nanosolar and other alternative energy companies and wants to be the provider of smartgrid/electric technology in the US, it has tried its hand in high speed internet providing, it will soon offer the ipad clone, gpad.. and it tries to copy apple itunes by offering its own Google music store and other crap like Google Editions (selling ebooks), etc..
Google is categorically and fundamentally shifting from “free” to becoming a real company selling real goods and services because that’s the only way it will survive in the very long run. They just bought ITA and will have plans to directly SELL airline tickets soon! After its Google OS is done they will start selling their own netbooks, gpads, etc.. Android is already spreading faster than iOS4..
Who really wants a company that controls your information, reads your mind, provides you with “smart” electricity, is your ISP, your phone company, your hardware manufacturer (Google TV, gpad, gphone, google netbooks) your software (Google OS, Google Apps) and your browser? They want full control at every level and every layer..
Facebook tried the “like” and social graph thing at toppingly Google but it isn’t working out so far. Google is the real threat here, it knows its business model is threatened and it is becoming more and more desperate..
Just in the last 24 months it has tried first Google Wave.. (nope that didn’t make a splash — was facebook even supposed to be scared?) then they quietly killed that off and pounced with Google Buzz.. (privacy nightmare and besides who wants to use it?) Knowing that it was no facebook killer, they are now secretly working on “Google Me”… All the while Google’s original social network Orkut (with debuted BEFORE myspace and facebook) still caters to only the Brazilian demographic and never took off..
Google’s desperation will be fun to watch.. With all the revenues and profits and that overblown stock evaluation it can’t reinvent itself to safe its sinking ship..
Hi Jill,
I enjoyed your article and have come to the same conclusion. I recently de-activated my Facebook account. After the rush of reconnecting with old friends and seeing the kids’ pictures, there just wasn’t really very much going on that I was interested in.
I’m bored with Facebook as well but I wouldn’t call them worthless. I think any big entertainment company would happily buy them for $2 billion. Maybe $15 billion is a little crazy at this point but $2 billion? that’s a bargain. And that ain’t worthless.
Good, to forgive; best, to forget. — Robert Browning
the five persons on FB part is especially funny. About Google, I’m not bothered by them either, you can use Bing if you think they’re evil, or you can go Cognito. If you don’t want to use Andriod, get an iPhone. and iPhone and iTunes clearly need some competition, it benefits us, the customers. ok they’re one trick pony, but they’re the only company who makes big money with online ad. On the internet, you either have to pay or the product is subsided by online ad. I’m really happy online ad works for them, I like free stuff. Even FB is considering doing search, and they rely on online ad for revenue too. It’s very difficult to get people pay for stuff on the internet, just look at newspapers’ struggles. From friendster,myspace to FB, no one has come up with a business model to make profits beside online ad. myspace was bought by a media company, so what? I don’t think media companies are in any rush to buy facebook.
Never mind who’s evil and who’s not which is not even what the original post is about. the bottom line is FB is boring, Google is useful.
Good article. While Facebook could be sold for a hefty sum right now, it would be a huge mistake for anybody to buy it. As long as it’s free most people will keep their accounts (unless Zuckerberg keeps his face all over the internet in privacy scandals). But having some 400 million users equates to about 1/15th of the world population, and somehow I get the feeling many of those are people with multiple accounts or people who log in every couple weeks or so. Over time people will be willing to pay less to advertise on FB because of the declining usage and excitement around it, what goes up must come down.
Additionally, if they ever tried to charge for membership, some people might care enough to stay but a whole lot of those 400 million wouldn’t be willing to pay at any price point, and what makes Facebook valuable to advertisers and users is that EVERYBODY they know is on Facebook. When people start leaving the decline of Facebook will be almost as fast as it’s growth. Just like that other site people used before Facebook, I think they called it MySpace or something like that.
I agree Delta. While I did put in the blog that FB should start a subscription of some kind (even $0.99/month), I wouldn’t expect it to happen and it may start the demise of FB even quicker (to your point). But they are going to have to do something or become worthless. They are too big to buy and don’t have the growth story anymore for Wall Street to be too excited.