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While most of corporate America is focused on cutting costs, Facebook is trying to manage hypergrowth. It's a nice problem to have -- especially during a recession.
But the question remains: will the growth stall? No doubt, nothing grows forever, especially in the brutally competive social networking space. Remember MySpace or even Friendster?
Yet, according to Facebook's latest update, things remain in growth mode. Less than six months after attaining 200 million users, the website has now exceeded 300 million (about 70% of the user base is outside the U.S.).
If anything, Facebook has become an alternate life for people. It's a daily ritual, which often involves looking at other people's soap operas.
Despite all this, Facebook has been tough to monetize. All in all, advertisers want to have control where their brands go. And in the Facebook environment, things can get dicey.
But Facebook has the critical advantage of scale. In fact, the company has also announced that it has become cash-flow positive. Keep in mind that Facebook didn't think this would happen until 2010.
So, Wall Street is probably calling them up to talk about the advantages of an IPO. And given the latest numbers, Facebook would have no problem pulling off a highly successful offering.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
9-16-2009 @ 2:19PM
e.krabs said...
An excellent article with an excellent question.
To be sure, I do think their current market share in social networking is justified. They have a clean and fairly intuitive interface that works well.
However, I am not sure what kind potential technology they have yet to tap. Even networked games like Farmville, appealing as it may be, has its limits. At least, I am not aware of any forward strategies with serious upsides that I am aware of.
And as you have stated, such this sort of thing is also tough to monetize....
We'll see. But yeah, my current view on FB is bearish as well.
9-16-2009 @ 10:34PM
Iridium said...
Facebook can never make dollar one. To manage a system that caters to over 300 million people for free will always cost more than the amount of ad revenue that can be generated.
Facebbok can only make money by selling user data along with charging subscribers for content. The only reason why Facebook has said they can be cash positive soon is because they are getting ready for an IPO to catch the recent stock market wave.
They want to get in before things get dicey so they can generate massive revenues for Facebook executives. We could see Facebook head to a market cap higher than all of the manufacturing corporations left in America combined.
Only corporations that can create jobs should be rewarded with the kind of market caps these BS social networks have.
Facebook is just an information exchange tool like the telephone. AT&T never would have been able to stay in business if it didn't charge for phone lines. Power companies would go out of business if they didn't charge for power.
Yet Facebooks executives are given hundreds of millions when they need to spend money to give something away for free. I don't get how they can get a massive valuation of a few $billion. The only reason for this is to run a stock scam.