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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
I have been saying this since 2007 http://www.webguild.org/20071015/facebook-is-trapped
That a hard look at the people behind the company and the people running it. They are looking to make a quick buck and leave investors holding the bag.
Twitter is in even worse shape
http://www.webguild.org/20090408/twitter-dont-get-it-and-not-buying-the-hype
I agree Daya Barren with you on your over 3 years ago(!), they are trapped. They should just lower their valuation and become another piece of a giant media company – or pull together the IPO and cash out as soon as they can.
God I hope you’re right, Jill. That would be such sweet justice if Facebook became Worthless. What a happy day that would be!
It’s all about “show me the monies”.. Wherever people go, advertisement follows. Whether it be newspaper and print, radio, television, cell phones and the Internet etc — whichever media or platform is most pervasive in our culture at that time becomes the one marketers prey after. It’s about the eyeballs..
Newspapers had their heyday, the digital age killed print and publishing companies not because they drew the advertising money away but because when people started spending more time gathered around a color television set instead of reading the Sunday papers the marketers and advertisers switched from classified to commercials. Where people spend their time, money follows..
Newspapers -> radio -> TV -> Computer -> Internet -> Mobile, etc
Innovation is the driving factor. Technology improves and trends and tastes changes to reflect and take advantage of that. Instead of couch potatoes we have armchair potatoes. It used to be flipping the channels on the remote, now its surfing for free content on the interwebs. Ad money subsidized all of these platforms.
People don’t like paying for what they think should be free, and advertisers have been more than happy to subsidize the dysfunctional time wasting habits of a society and turn it into a platform to pitch their wares.
The problem is the tides are turning and the trend into small mobile devices/platforms everyone is shooting themselves in the foot. There are only X amount of free time in a day, when people use cellphones and other much small form factor devices like tablets and netbooks to work, play, and communicate the “real estate” for ad placement will shrink by orders of magnitude. Impressions will nosedive and CPC will skyrocket.. Google predicted that traditional “desktop” (full tower) will become obsolete in 3 years.. well that’s bad news for them too. When you go from 19″ monitor to 3.5 inch “retina display”.. advertisers simply can’t cram as much junk into our face as they used to be able to do, regardless of how “clever” or “emotional” the ads become.
Likewise traditional media (TV advertisers) advertisers have been hesitance to jump on the internet bandwagon because !) Google is the middleman, and avaricious intermediary 2)not enough people have switched to watching “tv” on the internet yet to make it worthwhile
This is why even Hulu struggles to make a decent living.. advertisers are hesitant, because they don’t want to kill off (displace or cannibalize) the more lucrative and much larger old traditional TV industry/sector..
Micropayments have never been technologically feasible until recently.. This is what facebook is counting on in terms of its “facebook connect” and recently the “open graphy” like “like” and “recommendations”.. In one swoop it has transformed from a “walled garden” to the entire internet itself. All the big players in the industry realize advertising is NOT the model of the future.. They are all scrambling to find ways to generate new revenue streams don’t dependent on the selling of ads.
In the future we will have to pay for everything with micropayments. Zuckerberg has long said the future of facebook is off the facebook.com site. As Google was the gatekeeper of our information, facebooks wants to be the intermediary and guardian of our personal information, and our wallets. Paid or at least freeium models (hybrid paid and ads sponsored) will be the future of the internet, both facebook and google are fighting to position themselves to be king. I think fb will win the war. Google just doesn’t get social, which is a pity for such a successful marketing company.
Not sure what to think here…
Good thesis and supported excellently – but let’s think like late adaptors here. Facebook maybe be “boring” to some of us early adaptors but those who are behind on the game (which is A LOT OF PEOPLE), it’s still new and exciting which businesses still take note on.
Also the people that you listed in your post:
•The Bored Office Worker
•The Super Mom
•The Quoter
•The Reviewer
•The Pissed Off Traveler
are all prime targets that major corporations are after and want to establish that “transparent relationship” with. Like you stated, these are the ones that are still on Facebook, even though WE may be bored with them Corps are more than interested in them; therefore, will still have interest with the major networking platform that goes by the name of Facebook (WOW GOTTA LOVE THOSE RUN-ON SENTENCES…Woot woot!)
Again, great article!
Decent post, although oversimplified a bit. Facebook is not cashflow positive (stop believe BS you read in blogosphere) and will not be for a while. 70% of its users are international, which is in the eyes of advertisers is ‘worthless’ indeed. Facebook ads, actually, do not work for advertisers (don’t know where that come from) because ‘social net’ has lowest conversions.
Facebook’s revenues look as follows: ~$600M in ads, $150M a fee from Microsoft for serving sponsored search results and probably $150M for virtual goods/games and other stuff. They are somewhere around $1B in revenue, but it definitely costs as much to run the business per year.
So, there is some value there, but not as much as people think. Yes, agree, all social media stuff is largely a fad that dies off eventually (MySpace, Friendster, GeoCities, etc.) – and Facebook won’t be an exception.
FB is a ponzi scheme. No goes to FB and clicks on the ads. Businesses realize placing an ad on FB is a worthless. When most businesses have finally realized this, or when FB stops growing, FB’s revenue will dry up. On a side note, Zuckerberg did NOT invent FB. Aaron Greenspan did! It’s a fact.
When you starve with a tiger, the tiger starves last.
Once a thief, always a thief – Stevens.
Wow, didn’t know FB had ads. (Well actually I did because I have seen mention in the media.) I guess my ad blocker works pretty well on that site. I turned it off and took a look. The majority of the ads were in the Romanian language because I guess they are ip-centric. They are useless on me anyway because i do not understand the language.
BTW Bo — The World – a division of Google. lool
Facebook is a fad. Sadly, people won’t realize that till it’s all over. Then, they’ll all scramble and say “what happened?!”. Looks to me that it’s just past peak. It’ll slowly fade until something new comes along (something simpler, and better), then it’ll tank fast.
Jill you are absolutely correct. Facebook was built badly from the ground up in so many ways. As you correctly pointed out.. the ship has sailed at charging via a subscription model. The ship has also sailed on re-engineering the overall architecture that the site is built on so it can more effectively and (most of all) efficiently manage “filters”. People I don’t think realize that Facebook is going to have one hell of a time scaling their backend knowing how many “processor ticks” it takes for each user filter to be in place. Times that by all the users, and then multiply that by the requested number of filters per-user that the privacy people are in uproar about and you got a site that will grow itself into death. When the extra computing time needed for filters is converted into what it actually means in IT spending.. Its mind boggling.
Google will have the last laugh because they have been in this game since Dodgeball was acquired, and they just know how to plan large systems that scale better from the inception of the idea.
It’s gone to far Mark.. and of course you are holding out on that IPO because you know its ultimately the last harrah!
I feel that this quote really makes this viewpoint of this article questionable: “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.”
Great point! …in another argument maybe… What kind of idiot thinks that’s a comparable analogy to fb?
What happens when the theater and distributor become the same business and the content (boring home movies?) is created by the audience instead of Disney/Pixar? I guess you’d kind of have to be a little imaginative and experiment a bit in this new paradigm before finding a sensible and workable way to reliably generate income.
j to the a – I think it’s an apt analogy. Consumers accept having to pay for a Pixar movie. Why can’t consumers accept having to pay for something they spend far more time doing – going onto FB? People who work at FB are scared shitless at having to propose something like that. And it’s not because they care about their users and want to give them a free experience – its because they fear their user numbers will start to go and Wall Street will not embrace that post-IPO. FB is really stuck right now.
Can’t comment on the business side, because as far as I know, actual facts and figures have not been released. I can say that it’s ridiculous for someone over 25 to proclaim that the population of Facebook is getting bored of it. In all honesty, Facebook was not made for you. It survives primarily on the young-uns, who are far more wrapped up in their social lives.
And Myspace did not die because it was a fad, it died because it was a horribly designed site. Every time I happen upon a Myspace page, it’s as if I’m teleported back to the ’90’s. Myspace is cumbersome and comparatively difficult to learn. It died when Facebook, a far more elegant website that nearly anyone can use right off the bat, was opened to the public. Unless there is some better alternative down the line, I don’t see Facebook dying from lack of users anytime soon.
Andrew, the majority of the people getting totally bored with FB are the under 25 crowd. Talk to any mom or dad out there and they’ll tell you they love Facebook. Talk to any 16 year old and they’ll say – Facebook is so over. I’m done with it.
uh…. so maybe google should start charging for searches? Are they worthless too?
heh… and would your three friends still pay 99 cents a month if YOU WEREN’T THERE READING????
social networking is about hitting more eyeballs.
But, your post wasn’t even serious. You just write this drivel because YOU want to reach more eyeballs. If you write something *just* dumb enough, people like me get irritated and comment, which generates more traffic to your advertisements. Why can’t I resist replying? That’s the power of facebook.
No – my friends would not pay if I wasn’t there. This is a big problem that Facebook has. I don’t believe the pay model will work – but that’s the only option for survival and since that is something that won’t work – Facebook is Worthless.
Google doesn’t need to charge for searches because they have plenty of paying advertisers that actually gets results. No one cares about advertising on FB and the more they add to try and jack up revenue, the more pissed the 500 million users will become and it will soon become 400 million, 300 million, etc. etc.
How did the whole eyeball capture thing work for MySpace and Bebo – they had plenty of eyeballs.
I love your analysis of the types of users, especially the Super Mom. Seems like FB is ultimately a way for people to convince their friends that their lives are completely rich, rewarding and fulfilling.