Today as I tried to figure out how to turn some new features off in Facebook, I came across an article stating that a Facebook IPO could come in at $100,000,000,000. That is 100 billion dollars… An amount of money that I can’t wrap my mind around for several reasons.
When I look at this story line, I do not see the Facebook saga ending well unless investors have knowledge of a silver bullet that Facebook will deliver to market, changing everything we know about how to use their “social graph”… I think that Facebook has a bright future, but an inflated valuation leads to burning cash which creates the volatility that bubbles are made of; this is what concerns me because a software bubble is bad for business. At some point when investors start pushing for returns and Facebook under-delivers, everything goes south from there. The valuation of Facebook really boils down to the fact that it commands a critical mass of over 800 million people. The stats around Facebook usage are un-real, and something that makes Facebook un-like any other technology.
They always say that you should invest in things that you know… As a Facebook user, potential advertiser, and enterprise software CEO, I have not given a single dollar to Facebook. On the other hand, I have given Google tens of thousands of advertising dollars over the last year. The entire online advertising market is $25B and Facebook commands less than 5% of that market; though it is growing significantly year-over-year.
What are your thoughts? Do you think $100B public offering will be the beginning of the end for Facebook? or do you have confidence that they will overcome serious skepticism and remain a critical hub of our social media experience without burning investors?
Great insight. I think you are dead on. I have actually been behind the changes to UX that Facebook has recently been putting into place by hiding or removing certain features and streamlining the core elements of the experience such as the newsfeed. Before those changes were made, I was afraid they were adding features too much to appease marketers and advertisers rather than designing around users. The experience was getting cluttered, the authenticity of social connections on the site were being watered down and brands were becoming more prevalent. If Facebook is over-valued at IPO, the pressure to appease stakeholders is going to be even greater, and it wouldn’t surprise me at all to see the integrity of their experience suffer for it.
The amount of marketing data that Facebook holds is unreal. I don’t think revenues in the multi-billions per year are out of the question. I don’t think they have really done a good job of marketing this potential to corporate clients. They question is how to increase the marketing to the users at a level that won’t annoy them or be too in your face.