After a brief decline from $70 billion to $65.5 billion, Facebook’s valuation is on the rise again according to TechCrunch.com’s SecondaryMarket analysis. To be perfectly honest, I’m not surprised and in my opinion, the people who compare Facebook to MySpace or Twitter are just plain wrong. Why? Let me explain:
1. Technology
If you honestly think that Facebook and let’s say MySpace are similar in terms of technology, then perform a Google search for the term “open graph” and then tell me if you still haven’t changed your mind.
2. Demographic Data
As a Facebook advertiser, I definitely understand the importance of the targeting options they’re putting at my disposal. If I want to target 20 year old students, no problem. If I want to target stay at home moms, no problem.
They have a LOT of information about their user base and without the demographic data they’re putting on the table, their traffic would be worth a fraction of its current value.
3. Internet Impact
Facebook is more than just a website, this is what everyone needs to understand IMO. Facebook is a platform, remember this word. Platform, platform, platform!
Users spend insane amounts of time on Facebook and this platform (just said it again, see what I did there?) is playing a more and more important role in their life. A lot of people pretty much interact with the Internet through Facebook nowadays and this fact alone says a lot about future expansion possibilities if you have an open mind.
Could Facebook fail? Sure, nothing is impossible, especially on the Internet!
Is Facebook similar to other social media websites? No, no and no. Facebook is in a totally different league and while its valuation may seem outrageous if you only take their profit numbers into consideration, it stops seeming all that outrageous if you take a step back and see the big picture.
February 20th, 2011 at 6:08 am
Let’s imagine for a moment you have a beautiful stretch of beach along Fort Lauderdale or Miami where there is free parking and even free drinks. People come from miles away to visit. Then the owner decides OK it’s time to start making some money from this venture and starts charging for parking and drinks at rates which are reasonable but pricier than some surrounding areas. Will people continue to visit? Of course – it’s a beautiful beach. But the number of visitors will decline because now people have to pay and there are lower-cost alternatives. Hosting accounts are not expensive but they aren’t free because providing this service entails a cost. What happens to Facebook’s user base if they start charging $100/year, $250/year, $500/year?
February 20th, 2011 at 6:15 am
P.S. Before you say that $100/year won’t change their user base, keep in mind there are individuals in emerging-market countries who use Facebook where disposable income is extremely limited. My wife has a niece in Colombia who uses Facebook extensively but even at $100/year it would likely be bye-bye Facebook.
February 20th, 2011 at 6:18 am
@Leonard: in my opinion, Facebook will never make people pay for their membership. Take it from someone who has been a Facebook advertiser for quite a while (I stopped bidding because lots of branders like Nike and whatever came along and as a result, prices have been inflated unreasonably for someone who actually monitors results, at least as far as my niches are concerned): Facebook’s traffic is worth a lot of money and they’re definitely not willing to jeopardize that.
As I’ve mentioned when I’ve referred to demographic data, the information they store on users (age, interests and so on) is extremely valuable to advertisers like myself (without it, their traffic wouldn’t even be worth 1/10 of what it is now IMO) and the fact that users spend a lot of time logged in is a major advantage. These people know what they’re doing and I seriously doubt that they’d be willing to jeopardize what they have by charging for memberships.
February 20th, 2011 at 6:23 am
Just read your second comment and I agree 100% that charging even $10 per year would have a drastic effect on their user base but scenarios like these are not even worth taking into consideration in my opinion because as a company such as Facebook, you’d be shooting yourself in the foot by making people pay for memberships, just like you’d be shooting yourself in the foot as a search engine like Google by charging people who want to search for information and so on.
February 20th, 2011 at 10:10 am
Hello,
We find it terribly ironic that the same company that backs Farcebook (Goldman), is often used as a backup to substantiate Facebooks valuations. This is the same company that SHORTED their own recomendations to cash in on market manipulation!! We think Facebook is an accident waiting to happen.
Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)
February 20th, 2011 at 10:41 am
@Jeff: thanks for dropping by. What do you think about the fundamentals of Facebook as a platform? Is FB here to stay in your opinion or is it just what one might consider a “fad”? In my opinion, FB is definitely not just a fad for reasons such as the ones I’ve referred to previously but I always like to hear different ideas.
February 20th, 2011 at 2:51 pm
Hello Andrei, My Pleasure
To know how I really feel about Farcebook is well documented on the many Blog comments I have made which is easily followed by tuning into DOMAINING.com !
Facebook is the most un-empowering bad idea for DOMAINERS there is. Fad is the mildest opinion We have of Facebook!
Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)
February 20th, 2011 at 5:37 pm
@Jeff: when it comes to Facebook’s long-term sustainability, it’s irrelevant whether or not it’s a great idea for domainers. What matters is how the general public perceives Facebook and the role this platform ends up playing in their lives.
In my opinion, Facebook is on the verge of becoming something that the people behind competitors such as MySpace couldn’t even comprehend a few years ago, it’s on the verge of becoming the platform (once again, I’m repeating this word obsessively because therein lies the key) through which the average Joe might ultimately interact with the Internet.
It’s more than just a random dime a dozen social media site. A lot of people say that Facebook is a fad but when I asked them to explain why, none of them had reasonable arguments and in my opinion, most Internet professionals make the huge mistake of thinking that FB is similar to MySpace and other competitors. I’d love to hear any arguments in favor of the idea that FB is nothing more than a fad, can’t say no to a good debate 🙂
February 21st, 2011 at 5:32 pm
I wouldnt join facebook if someone had a gun to my head. What a load of trash chatting crap.
February 22nd, 2011 at 4:37 am
@Mike: you are reading this blog, so you’re probably a domainer or a webmaster, in other words an experienced Internet user. When it comes to Facebook’s long-term trajectory, what experienced Internet users think doesn’t matter all that much. What matters is how the general public (the average Joe, so to speak) perceives Facebook and I’m sure you’ll agree with me that a lot of your offline friends who aren’t earning a living online are thrilled about this platform.
February 23rd, 2011 at 7:45 am
Really good article I will think about it .
March 4th, 2011 at 7:05 am
Facebook is more than just a website, this is what everyone needs to understand IMO. Facebook is a platform, remember this word. Platform, platform, platform! :/
March 17th, 2011 at 7:28 am
We find it terribly ironic that the same company that backs Farcebook (Goldman), is often used as a backup to substantiate Facebooks valuations. 😉
August 12th, 2011 at 9:28 am
An interesting discussion is worth comment. I think that you ought to write on this topic, may well certainly be a taboo subject but normally everyone is too few to talk on such topics. To another. Cheers