What If Facebook's IPO Dreams Are Built On As Much Hype As Groupon's?

http://www.forbes.com/sites/ericjackson/2011/11/23/what-if-facebooks-ipo-dreams-are-built-on-as-much-hype-as-groupons/

by dmk23 • 15 years ago

42 24 15 years ago

hendrix• 15 years ago

It is, except with a more addictive business model...

Back in the day (freshman @ uni so 2006) all the cool kids were making facebooks. You had to have a .edu email address which let you into that uni's network. Only the students/recently graduated could participate. Now everyone and their dog have facebook accounts.

To make something popular and or "exclusive" one needs to have a niche of exclusive/cool people willing to use that product and a bunch of other people that don't have access to it. This is EXACTALLY what Zuck did at Harvard. He created the ultimate cool kids club at the most exclusive university in the world. This would have been impossible at almost any other university, also Harvard doesn't have the nerdy reputation of some other universities in Massachusetts. Then they opened it up to the masses, and all the parents/people who are not students/hs students got accounts and the exclusivity went downhill. But that isn't their main strategy anymore, it is to keep people yearning for human interaction, but without any negative social consequences... There is a VERY good reason that it is not a good idea to ask a girl/guy on a date via facebook, which is the exact same reason which makes it so popular aka no negative social consequences (can look @ the cute girls bikini pictures all day long and you don't get yelled at) but only to an extent. That is the facecrack.

So yes, they will be able to maintain the facecrack of pseudo-social interactions. They will not be able to grow with the exclusivity that they once had though. This is until the next exclusive thing comes along though.

tldr:

1. FB grew out of Harvard and associated exclusivity & worldwide appeal

2. FB uses pseudo-social interactions to give its users a limited amount of good feelings, but does not have the consequences of real life interactions.

3. FB will cease to be king of the mud pit if something more exclusive comes along.

reso2• 15 years ago

Facebook has 800 million users. All semblance of "exclusivity" and "cool kids club" has long since dissipated, but they've still added 300 million users since last summer.

The method by which they launched the business seven years ago is not very relevant to predicting their IPO success.

libraryatnight• 15 years ago

I think it's transitioned from exclusive cool kids club to "Well everybody is there, if I'm not, I won't have any idea what my friends are up to."

reso2• 15 years ago

What a shitty article, right from the beginning.

>Google Hates Facebook

Sensationalism.

>Facebook’s rapid ascension is arguably what prompted Larry Page to tell Eric Schmidt to step aside in January so that he could take the reins of Google and make it more streamlined and efficient.

No its not. Larry has always wanted to be CEO and they decided that he was ready, after 10 years of waiting.

>But, hold on for a second. What if advertisers don’t care about personalization? That’s a big what if — but what if they don’t?

They do. That's not an 'if', its a 'no'.

>There are several possible ways for Facebook to make money: (1) highly targeted ads, (2) charging publishers to have a Facebook Connect integration (which is currently free), and (3) data analytics of users’ behavior/patterns. At the moment, their over $4 billion in revenue comes from option 1. The other 2 might be great businesses as well, but let’s focus on the first.

The suggestion that Facebook would charge for connect integration is absurd. Similarly absurd as that they would charge users.

AJ007• 15 years ago

Link bait article that barely even deserves acknowledgement for its existence.

Note to news sites: trade your credibility for more unique visitors, and eventually you will just be a tabloid.

joe_the_user• 15 years ago

Yes, the article is bad however the problem itself remains.

Article: But, hold on for a second. What if advertisers don’t care about personalization? That’s a big what if — but what if they don’t?

Parent: They do. That's not an 'if', its a 'no'.

Yes, advertisers care about personalization currently. They've been taught its great. The big question is whether they can actually turn their belief into money because if they can't that belief won't hold even if they're currently shoveling money into Facebook.

Many, many people have made argument that Facebook can't monetize on the order of Google because people don't go to Facebook to buy things. Of course, many others have attempted to debunk this objection, I don't think we glibly say things are settled one way or the other 'till Facebook is making Google-scale dollars on a multi-year basis.

nl• 15 years ago

The big question is whether they can actually turn their belief into money

They can

I don't think we glibly say things are settled one way or the other

It's settled enough for people to be spending large amounts of money on Facebook (as well as on Google)

At the moment you can get very precise estimates of click-though rate for an ad on Facebook. The rate is less than on Google search, but generally more than the broad internet.

medinism• 15 years ago

Agreed. this guy clearly has a passing understanding of the business.

1010101111001• 15 years ago

I find it amusing to read an article that talks about a potential 100bln IPO and at the same time asks how this company will make money. If that is still an open question then something is very wrong with this picture.

But some people, e.g. at Goldman, do make good returns from these hyped IPO's no matter what eventually happens to the business, so these IPO's no matter how ridiculous they may seem do make sense for those people. Their risks are sufficiently limited. The more hype the better.

viscanti• 15 years ago

Total users is a poor measure of value. Google's search is so valuable because people are using it to actively find something. Advertisers are looking to let people know about their product/service, and the most valuable time is when someone is actively looking for it.

Facebook, as currently constructed is much less valuable to advertisers, because most people aren't using it to find out information about products/services, and if they are, they're going to that brand's Facebook page.

Facebook is still mostly "potential". The hope is that they can find a way to monazite their large user-base. The Facebook platform with credits has room to grow, but how many more iterations of Farmville are there? The biggest potential I see is with Facebook commerce. If they can leverage the credits system into an easy to use payment system for things other than Facebook games, they might have a winner. None of that is guaranteed though.

paganel• 15 years ago

> Facebook is still mostly "potential". The hope is that they can find a way to monazite their large user-base.

There was a chart navigating the interwebes a couple of months ago documenting "time-on-site" for both FB and Google. As far as I remember FB had just managed to topple Google on that criterium, which supposedly made the latter "scared shitless" (to paraphrase a comment I remember reading on that story).

Edit: I've found it - http://articles.businessinsider.com/2010-09-09/tech/29987553...

locci• 15 years ago

Google is a search engine, not a content provider: the less time I spend on it, the better it works.

On a personal note, I very much dislike the walls facebook builds around its experience: it annoys me almost as much as content farm popunders.

ippisl• 15 years ago

I think only ~50% of google's revenue comes from adwords. That's leave's 50% as a target for facebook.

Also there can be other ways to measure intent. For example analysing content of chats or status updates in real-time.

And given large amount of IPO cash + huge user base, maybe facebook can build a good enough or interesting search engine that could draw users.

Also , facebook's data could be the basis of TV ad targeting when internet TV becomes the norm. So there's another revenue source.

On the other hand, google can combine all sorts off data to get strong targeting, so it's not clear who will have better targeting.

cleaver• 15 years ago

I walked into an Apple store a few weeks ago. I'd estimate that about 80% of the people who were trying out a machine were on their Facebook page. That's not hype. (It's actually a bit frightening.)

mikedougherty• 15 years ago

This article is just false comparisons and strawman arguments.

Why is Facebook's IPO anything like GroupOn's? Completely different business models.

G+'s existence is used as an excuse to compare Google with Facebook, but G+ wasn't even a thought when Google IPO'd. Again, completely different business models.

The author then makes up the particular case of an "Ivy League Northeast pet lovers" demographic and says that things like Tide, Mission Impossible, car companies don't want to market to them. This is not how targeted advertisement would ever work.

* You market Tide to demographics that are in charge of the buying decision for laundry detergent in the household (this knowledge has been around for literally decades: soap operas) - how about people who talk about doing laundry in their status messages? Or how about people who list their children on their facebook profile and don't list an employer?

* You market Mission Impossible to people who say they like Mission Impossible (and similar movies/series) in their "Stuff I like" section or by using their "likes" from sources like IMDb, etc. Maybe they also check in to movie theaters regularly - especially if they often check in with a certain group of friends. Show those friends the same ad.

* You market cars to people who seem to have the income to afford a car (using job descriptions, maybe seeing how often and where they eat out using checkin information to get some sort of estimate on disposable income) and maybe you even filter that to people who complain about their car. On top of that you could even filter by the last time the user got a vehicle - this is now an event you can add to your timeline.

theDoug• 15 years ago

What if Forbes did some reporting and didn't just end blog posts with question marks to talk about imagined controversy?

Poorly written article. It's a shame that Forbes, for whatever prestige it had in the 80s, has turned into garbage on the web.

wavephorm• 15 years ago

One thing is for sure, when the Facebook IPO implodes it'll take down the entire startup ecosystem with it.

signalsignal• 15 years ago

The situation is more like this, IF the Facebook IPO implodes, it'll put the entire startup ecosystem on hyper-cocaine-steroids.

CPlatypus• 15 years ago

Two differences between Facebook and Groupon immediately occur to me. First, despite everything else that's wrong with it, Facebook's business model does not depend on persuading small businesses to sell goods and services at less than their cost. Second, Facebook has generated significant value in the form of non-replicable technology, infrastructure, and connectedness to just about everything else on the net. None of this is true of Groupon. There is nothing hard to copy about Groupon, and "find more suckers" pretty much sums up their business model. These are the differences between a company with staying power and a company without it, so only a fool would expect similar IPO outcomes.

austenallred• 15 years ago

Facebook makes profit. End of discussion.

What If Facebook's IPO Dreams Are Built On As Much Hype As Groupon's?

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