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Facebook Is Worthless - OnMedea

Facebook Is Worthless

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facebook_mark_zuckerberg.jpgSalacious 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.

mark_zuckerberg_2.jpgImagine 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 and 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).

mark_zuckerberg_4.jpgThe 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_small.jpgJill Kennedy - OnMedea

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Molly Glover said:

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.

Hollywood Producer said:

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.

Mark Zuckerberg said:

Could I get you to change this story for 1 MILLION DOLLARS?! I think I could... BEEYATCH!

Funny... said:

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.

Oliver said:

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

Jill Kennedy said:

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.

HollywoodProducer said:

Is that really Mark Zuckerberg? If so, I like your email address.

Ben Franklin said:

As we approach this country's 234th birthday can we all agree that the real enemy is the British. Not Facebook.

Jill Kennedy said:

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.

Bo said:

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 ==

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.

Jill Kennedy said:

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.

Bo said:

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..

Beez said:

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.

Randy said:

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.

Mehda said:

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.

Delta said:

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.

Daya Baran said:

I have been saying this since 2007 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

Jill Kennedy said:

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.

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.

Horace from Hollywood said:

God I hope you're right, Jill. That would be such sweet justice if Facebook became Worthless. What a happy day that would be!

Bo said:

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 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.

Jas said:

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!

Jopa said:

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.

Chris said:

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.

Aaron Skoff said:

Good, to forgive; best, to forget. — Robert Browning

Annis Pollot said:

When you starve with a tiger, the tiger starves last.

Once a thief, always a thief. — Stevens

Larry said:

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

Jonathan said:

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.

John Drefahl said:

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!

j to tha a said:

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! 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.

Andrew said:

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.

Jill Kennedy said:

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.

And to 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.

nairbv said:

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.

Jill Kennedy said:

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.

Pete said:

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.

Rob said:

Once Apple or Google makes an unbeatable bid for Zynga and slowly carves it from Facebook, Facebook will gradually become irrelevant in its current form. Zynga has been hyperstaffing to handle the volume they have yet to achieve and on a game buying spree - just to have the games in the barn.

Facebook is poorly designed and run - it reminds me of one of those early ridiculous dotcoms that made no practical business sense. "How does the company make money?" Nobody here can answer that question, including the executive team at Facebook. And one bit of advice to those seeking the answer to that question. Anyone who hands you the stock answer of "subscription" is an idiot. The list of poorly run technology companies who gave their "must have" service away free, then had every attempt to monetize shoved back in their face is endless.

Customers buy a recurring subscription to something because there is personal value assigned to the product or service. Magazines, food/beverage of month, dvd's, premium television/movies etc. and video games.

Think of Facebook as a prime piece of specialized internet meat. Its parts are greater than the sum of its whole. Once Apple/Google strips away the Zygna games, Facebook loses 40%(+/-) of its market value and daily users immediately. The social part of the Facebook carcass will end up being stripped away by Apple/Google/MSFT and included in one of their "social media" platforms.

I think that the business lesson to be learned is how one company (Zynga) managed to build a viable, valuable, fully functioning business on the back of a company (Facebook) that is/was not viable or valuable as a standalone business.

Jock Scotsman said:

I agree with this article.Super crapitalism gone wrong again and the description of typical posters applies here in Jockland also.

matt said:

horrible article, social networking sites success is based almost purely on the "networking effect" something that putting up a pay wall ultimately defeats. Likewise, facebook is cash positive, so that whole point of this article is wrong. Actually I'm done, obviously you've done ZERO research.

I don't think I've ever disagreed with an article more in my life.

Jill Kennedy said:

Look, Matt from Facebook - the only people who defend Facebook are people who work at Facebook or people who are related to people who work at Facebook. Yes, everybody uses Facebook but only because EVERYBODY USES FACEBOOK - not because everybody likes Facebook. The only reason people at Facebook defend Facebook is because they want to be rich after an IPO. That's it. That's the only reason people hang around there. But it's over. It ain't gonna happen.

Joo Reis said:

This makes no sense. I hate facebook but from an unbiased pov it is certainly very far from worthless.

Comparing fb with a cable company is just stupid. If fb starts charging money people will move to another site. Just like that.
In the cable market it is normal to charge for the service in the social networking market it is not.


Bill Day said:

I don't know from business models, but I am not bored. Maybe I am easily entertained, or maybe I am lucky to have interesting friends. Recent discussions include the root causes of the Civil War and the lingering effects of slavery, the propriety of loyalty oaths in American life, good books on writing fiction, and the Saudi government's mistreatment of Moroccan women on pilgrimage. Sure, Facebook leaves a lot to be desired, but for me it is a good way to keep up with people I care about.

INDIAN said:

great post jill, but you are totally wrong. Facebook will grow and it will keep growing as long as human beings are curious about knowing whats happeing in someones life. in the 21 first century there is 3 things that are important to people their Family, their House and their "FACEBOOK" friends.

Dan said:

Facebook is already pulling in close to $1 billion in revenue per year and is on track to double that this year, most likely making it profitable. They don't need to charge for users because in doing so they lose the ability (from the users perspective) to run ads which are worth far more on a CPM basis.

Jack said:

An interesting discussion on this article -

Kevin said:

You have boring friends and a lame social circle. My facebook is nothing like You described. And your comparison to tv, well, facebook is where network tv was fifty years ago. Except more time is spent on facebook now than tv for most important advertising market segments. Let alone personalized ads. Why would facebook make people pay and lose 500 million captivated users? And by users I mean ad targets.

Actually you're right, nothing that isn't subscription based is worthless. Like billboards, major tv networks, traditional radio, google, yahoo, pandora, and any advertising campaign.

Jake said:

Youmshould cover playboy covers, not social media

Jill Kennedy said:

Thanks for the link on the discussion Jack - except when I click on it the first post says "this is a lame post..." But I appreciate the spirit.

Oh, and Kevin, I suppose I forgot to mention all the Farmville and Mafia Wars updates that you no doubt clutter the system with. I love to get those updates. So much fun.

Jim said:

*you don't understand how facebook makes money or their business model
*just because it is free doesn't mean it is not profitable
*Google makes tons of money every year off a free search service

Amar Patel said:

Facebook has no soul and Mark Fuckerburg is the man who the world. The 2010's are set to be a time of great chaos and creation, something like the 60's. Facebook's facade will melt in this furnace. Once the shepherd is gone, the sheep will scatter. You and I both saw it coming, along with a few other outliers...

Mark Stacey said:

So what we're saying is : FB is useless to users, essentially. BUt Zynga is making money from the users buying pigs on Farmville.

So Facebook is a good business model for Zynga

So charge Zynga

schmoukiz said:

The good part of this article is the one about the main type of people that can be found on Facebook. That's true and funny. And a real threat to the business itself on the long run (the danger of people leaving it). But the proposal with taxing membership is the worst they could do. They could live well out of advertising, provided they invest some in content and addons that would make it more attractive and addictive to as many users as possible.

Nolan Grupe said:

That's a really silly argument, do you even understand what the business model for .coms is? If it were the same 'wishy washy' bs that caused the bubble to burst in 2001, then yes, they would be doomed. However, ten years have passed. Advertisers will pay billions of dollars a year for views, and tens of billions for clicks. Why start charging the users?

Nolan Grupe said:

Who do you think the advertisers pay? Facebook! That's why they have such huge capitalisation.. You really don't understand what's going on right now at all do you Jill?

Jill Kennedy said:

Hey Nolan,

Are you kidding me? What do you think you're posting on? A .com. With ads on the side (please click give me money)... Look at broadcast networks - squeezed out by cable networks and their DUAL REVENUE STREAMS - so now the broadcasters have to fight for retrans fees. The dual revenue stream is the only chance for real growth. Do you think advertisers are going to increase by double-digits every year to please Wall Street? If they don't, Facebook (as a public company) will be hammered. Google gets hammered even when they blow through expectations (hammered because they missed the 'whisper number').

Plus, I say in the story that it would be a disaster for Facebook to start charging a subscription fee - but that's the only chance they have to survive. So it's really a tough situation they are in.

B said:

Sorry Jill, but I think you are quite misinformed.

Facebook definitely has other revenue streams that are already performing quite well, and there are many additional opportunities outside of a subscription model that will allow Facebook to be even more profitable. (hint: think FB credits + FB being on all major websites)

Part of the reason why Facebook is so successful is because it focused on product and experience over monetizing early on. Not all companies can follow this strategy, it takes an innovative and well executed product and plan to do this. If you think that an online company with over 500 million users will ever be worthless than you are sadly mistaken.

Nolan Grupe said:

Thanks for the reply Jill,
I understand your argument, but I believe you're misguided. Here, check out the current price for Google stock:
GOOG‎ - Google Inc. (NASDAQ)‎
Open: 470.52
High: 471.75
Low: 468.55
Volume: 909,794
Avg Vol: 2,395,000
Mkt Cap: 149.79B

When did they start implementing 'dual' revenue streams? Google AdSense reminds me alot of .. I guess they're making enough money off of it. As long as the owners are rich and getting richer, it's got to be a good opportunity for investors. Provided that the owners of the facebook know how to pivot and change their business model into an extremely large and profitable company, which I truely believe they can do without moving to a subscription service (or charging the users in any way).

briggsly said:

You seriously need to moderate these spammers off your comments. "Geat site mate... [insert broken English here]."

Jill, while I agree with you on the "worthlessness" of Facebook, in the "without practical usefulness" sense of the definition, I do not agree with you on the "without value."

Sure, you've got 5 people spamming up your news feed, but you have 5 completely devoted users creating hundreds of pageviews for FB per day. Now multiply that times 100 million across the service.

Most websites are totally worthless (ever been to Facebook isn't any difference. There are certainly some worthwhile use cases, but they're in the minority. Farmville impressions? In the billions.

But to say it is a sinking ship? Are those 5 spam-tastic friends of yours showing any sign of slowing down? Nope.

Facebook hit critical mass for advertisers and is now THE place for reach (and targeting) because of user data they have.

TCrunch reports they'll hit $2 billion in revenue this year, which is more like a $4 billion current run rate, and have been profitable for almost a year.

You mentioned charging? They could lose HALF their users if they started charging that, and STILL be making more in annual revenue at their current run rate with their current free/adsupported model (would make $3 billion off 250million users at $12 annually).

So although FB is a wretched service, that doesn't mean investors aren't sitting on a gold mine.

Jill Kennedy said:

No shit, biggsly - the spammers always come out right before a holiday. I think they think no one clears spam over a holiday weekend. Wrong assholes!

As for your point... You realize I'm not really saying that Facebook should start charging - I'm just saying they have no choice. Advertising won't cut it because, frankly, people posting pictures and status updates of family reunions and drunken nights with frat brothers and hookers just don't work for advertising and certainly doesn't make anyone want to click an ad.

Of course there is value. It's has huge value - but not more value than its cost. The growth can only slow. Revenue may rise but costs will too. A company, in my opinion, with more costs than revenue is worthless. It could be a loss leader for some giant media corporation who doesn't care about the costs and wants to use FB as a platform for announcing new shows, movies, books, etc. But as a standalone - FB is in big trouble sooner rather than later.

Jill Kennedy said:

Hey Nolan,

Sorry if you think that FB has a stronger business model than Google. Google Ad Sense is not the reason they blow through their earnings estimates every quarter. Google Search is why. Search "Smartphone" and some company has paid Google big bucks to be at the top of that list. I'm sure Facebook could do that same sort of thing - but here's the rub - NO ONE CARES ABOUT FACEBOOK ADS and the more they stick in front of our faces, the more we are inclined to stop logging on. Google offers a service because we're really trying to figure out a Sushi restaurant in Studio City. It has a real purpose.

JR said:

you don't seem to have any idea of what you're talking about. facebook makes money and has been making money for a while now (since september 2009 to be exact). charging consumers is both unnecessary and incredibly stupid.

you sum up your facebook experience and take it as an example that for sure everyone else must use it the same way. we don't.

you talk about maintaining "multi revenue streams". facebook already has that. they have paid advertising, facebook credits, pages (which require payment for upgraded features). charging costumers is another way, but they clearly don't need it.

this article is a flashy title with little depth. nice try tough...

pete said:

facebook sucks and so does that zuckerburg cat. but ur totally off base and your movie analogy sucks, the content on the site is self created, not produced by a company and sold to consumers. Jr said it best, flashy title, no depth. your a pretty shoddy writer and your carging idea is idiotic

Patrick said:


if you think FB has no money - how do you think Zuck could donate cash at the rate of $100M?

Disclaimer: I dislike FB too.

Jill Kennedy said:


I didn't say FB didn't have any money. There is plenty of it going down the drain. I just said they are worthless. Worthless to any future investors who will not do very well with a public stock.

Also, the $100 million gift to Newark schools was giving in Facebook stock. They are a private company and only have "promised stock" and Zuckerberg said there are no plans for an IPO - so how long do the kids need to wait for that $100 million?

Uncle Deej said:


Your comments are accurate and 100% 'on the money'. This is a fad (albeit a VERY large one) that doesn't truly offer any potential investors any enticement to purchase. There will always be people who stay active in the online social scene, but like MySpace, they tend to move on to the latest & greatest when bored. Investors know this and require something a bit more tangible than billions of un-viewed ads that only tend to annoy visitors who are on the site for social reasons, not for potential purchases. I liken this to door to door salespeople. I'm in the mood to shop when I'm at the mall and in a position to buy something, not when I'm warm and cozy in my footed jammies without a thought of making a purchase on a product that doesn't interest me in the slightest.

BTW - your descriptors of many typical Facebook users and their online experiences could not be any more accurate! Love it...

Richard said:

Very insightful post Jill. Bo, you are spot-on with your opinions.

That Facebook are not going for an IPO right now is extremely telling. Any investment banker will tell you that NOW is the time, it makes no sense to wait unless there is a disclosure problem.

My money is on a load of media-supported hype and very dodgy books.

For a funny perspective on internet privacy see

Daniel Cook said:


I think Facebook has the potential to monetize their site without resorting to a fee for use. They are attempting to use their own Adsense as the primary way to make money, which does not work for them like it does for Google.

Their biggest issue with advertising is viewers on the site are not looking for a solution to an issue, like they are in a Google search. When someone does a Google search, they are asking a question and looking for an answer. If that answer is in the search terms or on the sidebar, it is an answer to the question. For Facebook ads to be fully effective, they must be highly contextual and provide the user some solution to a question they are not consciously asking. If one of their friends talks about a movie, an ad below the post that allows the user to buy a ticket to the movie at a local theater or rent it online would work. An ad on the side for the movie would not. It is all about context.

I personally find their site confusing and constantly in flux. I would like to be able to pull the feed into something like Google Buzz or Reader and converse with my friends through that mechanism. The social network that gets roles (not groups) and interoperability down will be here for the long-term. I think Facebook has the user base to both grow their company and make money. To do so, they need to find relevance both with companies and with day-to-day needs of their users (need to be share thoughts does not count). That and they need to buy out Zuckerberg.

Your blog is true, I have facebook recommend to my friends, and support you.

Dragon said:

Long time reader, first time poster! Great post. Appreciate the work thats gone into the site so far, keep it up! :)

eleusis said:

Hi, just found your site through TC. I couldn't agree with you more. I have ~200 friends, about half of which never do anything on FB (post status updates, photos, etc.). Another quarter I only see in my newsfeed because they friend other people, so at least I know they are logging in. And most of the content comes from about 10 people. Many people will post stuff the first few days or weeks they are on FB and then you don't hear from them.

However, I would venture to say this is an over-25 thing. Young people are using FB as a primary means of communication. It's the rest of us who didn't see our high school classmates for 10 years and suddenly found it interesting, then realize that everyone else's lives really aren't that interesting. :) Whether the under-25s stick with FB remains to be seen.

Wonder Jam said:

How can any one make a comment like that?

Facebook isn't going anywhere. Like 'life', facebbok is what you make of it.

M said:

3.5B visits for FB in Sep.
3.2B visits for google in Sep.


M said:

That's all fine and good but have you also seen facebook's ledger to compare? Since they aren't public, you aren't going to see these numbers the same way google shares them with quarterly earnings press releases. All I know is that 90% of the people who conduct a search on google pay no attention to the ads on the right and the top of the page. Does google care? Hardly. Should FB care if anyone clicks on their ads either? I'd have to say no. They still get paid regardless of click-thru rate. And if 10% of 3.5B is better than 10% of 3.2B, I'd probably take my ad revenue to FB instead of google these days.
Besides, like everyone else said-- the minute they charge even .01 for regular users, people will be on to the next one and FB will be doomed.

hell yes said:

finally someone has the guts to say it.

i am registered on facebook but don't use it for anything. even my status updates are seen by me alone (meaning i don't write any).

when i have the time ill delete all my old info and then it'll just be like my abandoned friendster account, my abandoned myspace account, my abandoned aim account, my abandoned gchat account, my abandoned digg account.

nothing is eternal on the web. except the web.

Jack Kirby said:

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'...

Tiara Karmel said:

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.

R. Viharo said:

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?

Jill Kennedy said:

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.

EG said:

"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.

Jill Kennedy said:


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.

Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.

EG said:

"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.

EG said:

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...

Age of Adz said:

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".

Have you considered adding some differing opinions to the post? I think it will truly improve viewers' comprehension.

I'm not certain how I feel about it...

Eddy Clenney said:

thanks!You made some good points there. I did a search on the topic and found most people will agree with this article,its a very nice article

Don said:

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 lol

Coupons said:

Google Inc. may lose business as Verizon Wireless starts selling Apple Inc.'s iPhone, giving the carrier's customers a new alternative to smartphones running the Android operating system.

J said:

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.

Jill Kennedy said:

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.

About Jill Kennedy

Jill Kennedy - Blogger - OnMedea Jill Kennedy is an Ivy League MBA / refugee from Lehman Brothers.

Manka Bros. (and the Manka Business Channel) hired her (for a very low sum) to cover the world of media (not the world of Medea) in her own words without corporate interference.

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About Medea

Medea Medea was a real bitch from classical mythology - as most famously dramatized by Euripides.

She was a sorceress and wife of Jason, whom she assisted in obtaining the Golden Fleece. When Jason deserted her, she chopped up their children. One could say, Medea acted as rationally as a major media company.


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