Facebook May Be Growing Too Fast. And Hitting The Capital Markets Again.

http://www.techcrunch.com/2008/10/31/facebooks-growing-problem/

by qhoxie • 18 years ago

16 15 18 years ago

mdasen3• 18 years ago

Step 1: Get a lot of users; Step 2: ???; Step 3: Profit!

This is why LinkedIn's ability to monetize is so important. Facebook has already raised half a billion and will probably need to raise that amount again to survive until it comes out with its business plan. According to the TechCrunch figures, they're loosing $142M/year (dangerous assumption, I know).

At that point, maybe Facebook can become profitable, but how profitable? I don't really feel like running net present value calculations (maybes someone else can), but when you're talking about VC of $1B and the better part of a decade before profitability, you quickly see how much someone has to make to actually be a worthwhile venture. Maybe Facebook will start making billions per year. Maybe Facebook just won't be able to monetize their traffic (to a profitable level).

gaius2• 18 years ago

Facebooks strategy has to be monetizing events. Create a cinema trip event, everyone who RSVPs gets their ticket booked automagically, Facebook gets a commission. Create a LAN party event, order pizza at the same time, Facebook gets a commission. Or sports or travel tickets or whatever. The scope here is vast, but to get there they have to be the de facto social calendar.

colinplamondon• 18 years ago

They used to be profitable, but they've killed off their profit centers (sponsored company pages, ala Apple's old group) in trying to score a home-run business model. Facebook can revert to the old model if need be, but they won't be getting that 15b valuation again.

nazgulnarsil• 18 years ago

i predict a crash, burn, and firesale.

Retric• 18 years ago

They will probably crash and burn in 2009 or 2010, however if they have 265 million / year in revenue they should be able to cut back staff 6months before they run out of money and significantly extend their runway. However, doing so would reduce their value to future investors which would make raising money harder and significantly impact morale.

The fact they are looking for money now is a good sign they understand the problem, but if that does not quickly pay off they need to think about cutting down their costs. Even if it damages their growth.

tyohn• 18 years ago

"750 employees and growing"? Why do they need 750 employees?

gaius2• 18 years ago

Foosball won't play itself you know!!

comatose_kid• 18 years ago

How many do you think they would need?

petergroverman2• 18 years ago

This is a great article... you think facebook will ever charge us to keep our profiles?

mdasen3• 18 years ago

No. Social networks are worthless without a large volume of users (or a critical mass in a niche). Charging money cuts down on the number of users and lowers the value of the network. Plus, people would just go to providers who didn't charge money - who either found a way to monetize effectively like LinkedIn or a new contender who is simply naive and has no business plan as well, but will offer free everything in the meantime.

petergroverman2• 18 years ago

Truth be it told... I'd pay $9.95 a month in order to KEEP my FaceBook account. I WILL NEVER RECREATE THE CONNECTIONS and tag all the photos and 'start over.' I'd pay $ no question to keep my account from eternal deletion.

ralphc• 18 years ago

No. I don't know percentages, but I'm guessing a majority of their users, especially the ones hitting it a lot, are college students, who are generally poor, and high-schoolers, which don't have credit cards and won't get money out of their parents to get on a site to complain about their parents. As soon as they charge these groups will go somewhere else as quickly as they came to Facebook.

pxlpshr• 18 years ago

I just don't see advertising revenue scaling and sustaining Fb. They need to generate hard cash, probably something along the lines of a subscription-based. Perhaps they should consider making Fb apps relevant again, except structured in a way that generates significant revenue similar to the AppStore. But I still don't see this sufficing.

Promotional leverage aside, the freemium model seems to frequently drown in a big hole of gluttony. And the point at which you try and change your model, often creates negative backlash from unappreciative consumers.

Certainly in retrospect it's easy to point out Fb's faults... but I feel like they should have limited free accounts unless you were a subscriber. Only paid members can create groups, pages, etc... but free members can join as many as they'd like. The social benefits still remain in tack, Fb is compensated for all this data storage, and helps curb pollution in the Fb community.

Facebook May Be Growing Too Fast. And Hitting The Capital Markets Again.

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