Saturday, May 03, 2008

Whither Facebook?

Fake Steve Jobs nails it again when discussing Facebook's valuation, in light of the new finding that the Web site is largely devoted to wasting time:

"Kids, let's face it. Facebook is Webkinz for adults. Facebook is a Ponzi scheme. A handful of VCs have created the illusion of an actual market by funding apps companies and then doing deals with each other -- passing cash back and forth among to make it look as if money is being made."


Count me as a Facebook skeptic. I do believe that Facebook is valuable, but I'm not sure that it supports the kind of valuations it's been getting.

To me, the potential of Facebook is that it possesses information about our relationships
(the dreaded Social Graph, a term that I despise as much as the newly trendy "Loops"--sorry Dave). The problem is that Facebook's attempts to leverage that potential (Beacon anyone?) have been ham-handed at best and disastrous at worse.

The move to open up the platform was a brilliant one, but the interesting question remains, how will Facebook make money?

While the Social Graph is undoubtedly valuable, it's difficult for Facebook to claim that value. It can't charge the end users, and it's hard to build a sustainable business on charging the application providers (just imagine how successful Google would be if it charged listing fees to be included in its index, or for using its search engine).

Google gets away with its free-for-all business model because the core behavior of search captures true purchase intent. Not so for Super Fun Wall postings.

In the long term, Facebook needs to do one of two things--build or attract applications that do capture purchase intent (which can be monetized by advertising), or applications that someone will pay for.

Either could be true, but neither is a sure thing given Facebook's history to date. Here's hoping Fake Steve's post goes down as a "Dewey Defeats Truman" moment, rather than as a prescient vision of impending disaster.

1 comment:

Michael J said...

Good point. I think the real value comes when Facebook functionality is when it is embedded in the real world.

For example My sense is that it is same functionality being used to re invent education delivery.