Revolutionary Measures

Farcebook and internet bubbles

Mark Zuckerberg, founder and CEO of Facebook

Mark Zuckerberg, founder and CEO of Facebook (Photo credit: Wikipedia)

I’ve found it difficult to watch the recent Facebook flotation, subsequent drop in share price and clamour of litigation without shouting “I TOLD YOU SO” at the top of my voice. Way before the flotation many analysts queried Facebook’s $100bn+ valuation given its relative lack of revenues but their voices were drowned in the hype. Just look at the number – with 1 billion users that’s a hefty premium per subscriber.

Obviously the growth statistics behind Facebook are impressive and there is still potential for it to grow in different areas around the world and by offering new services. But this is all potential rather than actual. A good comparison is Google – when it IPO’d in 2004 it had a valuation of $23 billion. Most of the services we now know Google for simply hadn’t been introduced, and the stock was priced according. Google has since increased its share value six-fold, giving it a market value of  $196 billion, helped by annual revenue of $39 billion.

There’s a decent chance that Facebook can ‘do a Google’ and monetise its users, probably through services that Mark Zuckerberg hasn’t even thought of yet. But equally it could languish in limbo in the same way as LinkedIn post-IPO without really demonstrating a vision for charging customers without losing them.

The bigger worry for me is that Facebook is continually held up by the likes of David Cameron as a posterboy for what British tech businesses should aspire to. And consequently we have a move to create frothy, social media driven businesses without clear business models, inevitably HQ’d in Tech City. It reminds me a lot of first generation dotcoms and the bandwagon that became. While some of these businesses may succeed, we need to look at what will create real value in the UK tech scene (the likes of ARM, CSR and Sage all spring to mind) and focus the best minds on solving real business problems rather than simply another cute network without any revenues.

So if the Farcebook float can change people’s perceptions that user numbers are good, revenues are not essential, then I think that’s a price that the gullible should have to pay. As the old saying goes, if it looks too good to be true, then it probably is.

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May 24, 2012 - Posted by | Marketing, Social Media, Startup | , , , , , , , , , ,

3 Comments »

  1. [...] So we’re all part of our herds, likely to think along broadly similar lines on or offline. This makes it a lot easier for marketers (and politicians) – rather than having to deal with people as individuals you can lump them together into particular demographics and then deal with them en masse. The problem with this is that genuine innovation tends to come from the mavericks – the people that run against the tide and aren’t afraid to be different. However in an atmosphere of conformity they can be lost, or, in the case of social media shouted down by the vocal majority. And this means the opportunity for innovation is stifled and rather than someone introducing an earth-shattering new business idea, we get yet another slightly different social network launched. [...]

    Pingback by Cows, herds, social media and innovation « Revolutionary Measures | August 13, 2012 | Reply

  2. [...] wrong on a whole stack of levels. There is a place for content/web-based businesses (unless it is yet another social network) ARM Breakout Boards (Photo credit: [...]

    Pingback by ARM about Face? « Revolutionary Measures | August 29, 2012 | Reply

  3. […] I’ve said before, the technical side of creating a new social network is relatively easy – and nowadays with cloud computing you have fast, cost-effective access to the resources you […]

    Pingback by Generating a network effect – why WhatsApp is worth $19 billion « Revolutionary Measures | February 26, 2014 | Reply


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