There’s an adage out there that says the following: if you don’t grow it, mine it or make it it’s not worth owning. In 2012 I would add one more, if it doesn’t add real value…
This is the lesson the Facebook investors are learning this week. The stock dropped 11% today in trading, and I fear the fall isn’t done yet. Well, I don’t actually fear it as I have no vested interest in it, and I’m even gloating a wee wee bit as I saw this coming a mile off.
I couldn’t for the life of me justify $38.00 a share for stock in a company that essentially does nothing.
Scratching my head, I tried to come up with an answer to that question all weekend long.
What value does Facebook ad?
Well lezzieheah, it enables people to manage their relationships with friends and family, I get that. Is that a “must have”? What exactly is knowing some details about Aunt Millie worth to you?
I fully acknowledge that Facebook is the category killer in this space. No one else can claim 1/6 of the world’s population as their client base.
They sell ads. That’s value for someone. They sell advertisers on the idea that an ad on Facebook is worth X and will deliver so many impressions, so much revenue, so much traffic. It’s not exactly revenue since the product they’re really selling, is all us, all of our faces anyway.
And the big problem selling ads online to fund revenue? We users of social networking sites and the like are a fickle bunch. Remember the lesson of MySpace and AOL before them. Yeah not so cool these days.
They enable others to sell software, or rather access to software. Add ons to Farmville for example.
Actually what I think they sell is a slice of a giant bubble, it’s a big bubble, don’t get me wrong, big as of this afternoon $82 Billion dollar bubble. But really bubbles don’t slice so well, they uh tend to pop. In Facebook’s case, after 2 days of trading, to the tune of about $15Billion. And as I said, I don’t think we’re quite done.
Consider another company that sells relationships, Linkedin. Linkedin is a professional version of Facebook. They’ve been trading publicly since May of 2011. Little over a year. Linkedin is essentially the world’s largest resume sharing service. It’s a low risk way to post your resume and let recruiters know, in “secret” that you’re willing to listen to from these folks. Come on now, we know why you’re out there. Sales leads my butt. Maybe after your resume is completed.
Not to discount sales leads, Linkedin is a way to get sales leads, you can also recruit new employees and to learn more professional details about those new members your project team, without having to go through the embarrassment of asking them. It’s where you find out where that jackass you used to work with landed after you heard he got fired from the company he left your company. You can snicker about his misfortune.
So in some ways it’s kind of like Facebook except.. except professional people, job seekers, sales people, working folks, are highly motivated to be on Linkedin. The service adds value based for networkers, salespeople and yes, job seekers. Even job seekers who are currently employed.
Facebook does none of this. Were it Linkedin to go away, professionals would be hard pressed to replicate the capabilities offered to them; the online virtual management of their contact lists, the ability to have their resumes at the fingertips of recruiters who in turn can develop a list of potential candidates without having to beat the bushes. As proof of my hypothesis, Linkedin has paywall, it offers premium memberships, with full access to all of their tools and that access costs money. Money paid is revenue and that company will rise and fall based on real subscription revenue.
Said another way, the product that Linked in “makes” is worth paying for. There is a value proposition there which can be monetized.
Facebook does not. Seth Myers on SNL this week said of Facebook “it allows you see how fat your high school friends have gotten over the years.” He’s right, and that’s kind all it certainly does that. I know, I’ve gotten pretty fat and lots of people I knew in high school now know I’m fat. They’ve seen my pictures.
But what is that worth to me..
Ancestory.com is another good example. Ancestory.com also enable you to manage relationships, albeit mostly with dead people. Ancestory.com aggregates massive amounts of what are essentially public documents and serves them up to amateur genealogists who only have to know a few facts about dead relatives to discover a ton of information about them, what counties they lived in, what boat they came over on, and all sorts of other tidbits. For those of us who like that stuff, like me, two hours into my Ancestory.com subscription and I had expanded my knowledge of my family tree, and it was all enhanced with copies of real documents mind you, at least twenty fold, and that’s conservative.
Literally 10 years of my investigations and questions were answered in minutes. And more was being added all the time. One day on the site and I took what had been a family tree that went back to my one known grandparent, back over 30 generations, all the way back the William the Conqueror, who if the research is correct was my 28thX Grandfather. BTW, 28 generations of grandparents is equal 134,217,728 people so chances are at least some of you reading this are my cousins. Hey Cuz S’up?
My point, Ancestory.com offers real value. They sell time, or rather time savings. They sell efficiency. They’re selling stuff which a certain group of people are willing to pay for, and it ain’t cheap. $30 a month or so.
Facebook offers none of this.
Every relationship I own on Facebook, and that every other of the billion subscribers owns, falls into the category of “nice to have”. If Facebook wasn’t there, I wouldn’t be in contact with my buddy Sam who I went all the way through elementary and high school with. I like Sam a lot, I’d forgotten how much I liked him before I was on Facebook because he wasn’t a part of my life then, I’d kinda forgotton about him, sorry Sam.
Even better, my cyber-pal Michael the Mike Guy. Michael and I have been friends for years, about 7 years I think. I know his daughter was a nursing student at Chico State, like my wife. I know he used to have a personal assistant corgi, like I do now. I know he lived in a house in Sonoma for almost two decades before recently moving to San Francisco. I sent a card and donation to the Susan B Korman project when his wife passed from breast cancer a few years ago and I was excited to send him a little wedding present a few weeks ago in celebration of his wedding. I was very happy that such a warm kind hearted man was lucky enough to find true love twice in one life time. It’s what friends do.
And, like most friends, Michael and I have some mutual friends, Michael is big in the barbershop choral community in the Bay Area as is my high school sweetheart. The two of them have probably met, which is ironic because Michael and I, at least in person, have not.
Michael and I have never shared the same physical space that we know off. I’ve never met him in person. I’ve never seen him except via pictures. I’ve never talked to him except via comments on each others blogs, emails, Facebook updates, and taunts in the Fantasy baseball league we’re in together. Facebook enables that, but our relationship didn’t start in Facebook, and won’t end when Facebook is gone. Sure it helps it.. but I can’t help feel that if Facebook didn’t exist, or if they failed, we would carry on. Facebook value is secondary to our experience.
And not to be harsh here, Sam, Michael this isn’t meant as a personal thing in case you guys are reading this, but reality is I haven’t seen Sam in over 30 years, and have never actually seen Michael. (I’ll catch up with sometime.. they’re great guys and I think we’d have a gas hanging out)
As much as I may value my relationship with them, and with 200 other friends, nothing changes because of it and frankly if Facebook went away, we’d find other ways to connect. In fact while Facebook enhances our relationship, it doesn’t make us use it to say in contact, liked Linkedin and it doesn’t save time like Ancestory.com.
I might pay something for a Facebook subscription, but if I had to pick between Facebook and say groceries, or getting my dog neutered, that premium subscription to Facebook would be a low priority.
Which is why I’m not buying in.