06 Feb What does Facebook really owe its users?
Last week, Facebook finally made the announcement of its public offering, ending a year of speculation about when it would finally come to market. Although I don’t normally follow the markets too closely, this particular story grabbed my attention for a variety of reasons.
The reason that everyone is discussing is the speculation over what Facebook’s data is actually worth. As we have grown accustomed to seeing in the stock market, the current valuation is somewhere in the ridiculous range of 100 times the actual revenue brought in by the company. Despite these vastly inflated figures, potential investors are still eager to jump on the bandwagon.
If you ever wanted an example of “park and pray,” here it is! Facebook’s value is primarily its audience and reach, which it has little to no control over. Although Facebook brings in revenue, there is no evidence that it will be able to comfortably capitalize on its data without alienating its users. Also, it’s well known that Facebook users are tremendously resistant to change, especially the types that would revolve around any increased sales or advertising.
Let’s not forget that Facebook is currently one of the 10 most hated companies in America, despite how much attention it gets for keeping the attention of its users.
The problems of becoming slower and less entrepreneurial will likely not help the situation much more.
Beyond all of the financial data comes an even more frustrating prospect. Across the media, many are questioning why they are not receiving a share of the cash.
This is a prime example of the disconnect that we’re seeing in the political arena and what’s playing out in the world economy.
When you go to a store, does the shopkeeper pay you for coming to their establishment? There wouldn’t be many businesses that could survive in that model.
Mark Zuckerberg, like him or hate him, has been a shining example of entrepreneurship over Facebook’s meteoric rise. His leadership and decision-making, often RESISTING some of the monetization strategies, has helped them out-compete. Let’s not forget that Facebook was NOT the first social network and at first, a lot of people laughed them off. Look no further than the story of MySpace, which was actually backed by Rupert Murdoch’s powerful News Corp.
So why do I care so much about all of these facts? Because there’s an opportunity here!
It’s not just the opportunity of the Facebook IPO, which will certainly make a lot of people a lot of money off the back of a tremendous entrepreneur. Rather than begging for a slice of that particular pie, look at the competitive environment and understand that there is an immense opportunity to capitalize on a now entrenched and slower moving Facebook with a superior product. There’s nothing stopping any Facebook user from simply creating something better.
With the current speed of technology, it’s a lot more likely than you think. The experts might laugh in your face, calling Facebook too big and too powerful. The same way someone might have laughed in 1996 if you would have told them that America Online would fall the way it did. The same way that someone might have called you a fool in 1984 if you told them that Apple would eventually be nearly bankrupt in the late 90s.
I’m sure a lot of people told Mark Zuckerberg that he couldn’t do it too…and look where he is now. He did and so can you.