Facebook's fail is going to be epic(theregister.co.uk)
theregister.co.uk
Facebook's fail is going to be epic
http://www.theregister.co.uk/2008/02/21/fb_nielsen_fall/
19 comments
I actually keep up with a lot of old friends even though family life keeps me very busy, but I had to create ourdoings.com to do it.
It's not a social network in terms of meeting new people, but it serves well the purpose of keeping in touch with people you already know.
It's not a social network in terms of meeting new people, but it serves well the purpose of keeping in touch with people you already know.
This would be circumstancial evidence for school being a popularity contest ( http://www.paulgraham.com/nerds.html ).
Well, that argument feels very circular to me, since I had PG's essay firmly in mind when composing my words about Facebook. :)
But PG's essay is mostly about high school and earlier, as I recall. Facebook was originally designed for college students. So I wouldn't want to suggest that the app was built around the kind of warped prison-yard junior-high-school culture described in the essay. The situation is not that bad: Facebook is an app for adults, and it remains relevant for adults. But it is primarily an app for young adults, of a certain age and social position.
But PG's essay is mostly about high school and earlier, as I recall. Facebook was originally designed for college students. So I wouldn't want to suggest that the app was built around the kind of warped prison-yard junior-high-school culture described in the essay. The situation is not that bad: Facebook is an app for adults, and it remains relevant for adults. But it is primarily an app for young adults, of a certain age and social position.
Judging from the eager way in which people are seizing on this tiny bit of evidence, it seems like a lot of people want FB to fail. And when you want something to be true you should be especially skeptical of evidence for it.
Sites have flat spots. I would be careful before counting those guys out.
Sites have flat spots. I would be careful before counting those guys out.
You think people want Facebook to fail? My impression is the opposite.
Seems like everyone with money invested in web 2.0 really wants them to succeed. Your argument works equally well there. Don't be so sure of Facebook's infallibility, either.
Basically, everybody just chill out.
Seems like everyone with money invested in web 2.0 really wants them to succeed. Your argument works equally well there. Don't be so sure of Facebook's infallibility, either.
Basically, everybody just chill out.
True. If Facebook fails then it's all the "web 2.0" world that will be affected, I hear a lot of people talking of another bubble about web 2.0. Some want their convinctions vindicated, others want to save their start up and money.
My bet is that the truth is in the middle as usual, just like when the first bubble bursted, it was a godsend who cleaned up all the mess produced by the basical non-understanding of the internet.
My bet is that the truth is in the middle as usual, just like when the first bubble bursted, it was a godsend who cleaned up all the mess produced by the basical non-understanding of the internet.
totally agree. especially since the stats this article cites are just a 5% drop in UK users month to month
hardly indicative of epic fail
You have to understand that the average facebook user doesn't know who created facebook or what beacon is. Facebook will be around for a long while yet because it provides a useful service with a really big inertia.
hardly indicative of epic fail
You have to understand that the average facebook user doesn't know who created facebook or what beacon is. Facebook will be around for a long while yet because it provides a useful service with a really big inertia.
stars fall too, explode to be precise, leaving a big black hole.
In w3m:
/sarcasm (just in case)
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[grayarrow] Facebook's fail is going to be epic (theregister.co.uk)
48 points by nickb 1 day ago | 68 comments
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[grayarrow] 14 points by pg 18 hours ago | link
¢ *Judging from the eager way in which people are seizing on
this tiny bit of evidence, it seems like a lot of people
want FB to fail. And when you want something to be true you
* should be especially skeptical of evidence for it.
Sites have flat spots. I would be careful before counting
those guys out.
¢ nreply
/sarcasm (just in case)
At least we know now that memcached really, really works.
Is it that big of a fail if it stabilizes with 50 million users? The real question is if they can find a way to monetize that (like AdWords did for Google) before they run out of cash.
Considering that Facebook has been "valued" at $15 billion, yes, 50 million users is a failure. That would mean that they'd have to justify why each and every user is worth $300. A good percentage may be worth close to that much, but certainly not every one.
That's a failure of the investors, not the site.
Well, let's look at it from an investment perspective. Growing tech stocks trade at 20-50x earnings, but an especially hot or new stock can trade at 100x (I'll use that for Facebook). So for a $15B valuation at 100 P/E, they'd have to make $150 million in profit per year or $3/user. I don't think they're there yet (I think revenues are in that ballpark, not profits), but it's not unreasonable.
Of course 100x is an extremely high valuation multiple for a company based on fundamentals instead of speculation, so if they can't monetize, or if they stop growing, or if attrition goes up, then their multiple goes down and then they might have to make $6, $12, or $24 in profit/user/yr, which I'm pretty sure is unreasonable.
Moral of the story: we're all guessing. If they can monetize, then every doubter is wrong. If they can't, then every doubter says "I told you so."
Of course 100x is an extremely high valuation multiple for a company based on fundamentals instead of speculation, so if they can't monetize, or if they stop growing, or if attrition goes up, then their multiple goes down and then they might have to make $6, $12, or $24 in profit/user/yr, which I'm pretty sure is unreasonable.
Moral of the story: we're all guessing. If they can monetize, then every doubter is wrong. If they can't, then every doubter says "I told you so."
Well, technically if you want to use that model, then if each user spends $25 a month on products/services they find on facebook, then after a year(collectively) each user will have at least spent, $15 billion, which I think is worth...well... $15 billion.
True, if TiVo or a cable company had 50 million subscribers, then yeah, it could be worth $15 billion. I don't see a $25/mo product from Facebook, though.
Not to mention that we don't know what percentage of the 50 million are active, participating users.
Not to mention that we don't know what percentage of the 50 million are active, participating users.
Of course Facebook only gets a small cut of that, unless they start selling massive numbers of "gifts" or Facebook tshirts...
Not saying that 15Billion isn't ridiculous, but the formula is n't nearly as simple as
value_per_user = valuation / num_users
value_per_user = valuation / num_users
I hope this doesn't come out the wrong way, but why isn't it as simple as that? I'm sure the Enron accountants could come up with a better valuation model, but that doesn't necessarily make it so. It's a simplistic formula, but it seems reasonable enough to me.
Valuation is not the same thing as revenues per year. Or profit per year.
an easy example: if facebook made 15B per year with 5B in profit, they could distribute dividends of the 5B each year to stockholders. In only 3 years, your original investment would be paid back and it would be all profit (to the investor) from that point on.
Would you think that was a good deal? I would! So good that it'd get bid up on the open market way past 15B.
an easy example: if facebook made 15B per year with 5B in profit, they could distribute dividends of the 5B each year to stockholders. In only 3 years, your original investment would be paid back and it would be all profit (to the investor) from that point on.
Would you think that was a good deal? I would! So good that it'd get bid up on the open market way past 15B.
Most commentators thought Zuckerberg was an idiot to turn down the $1 billion offer. My guess is that they can't wait to have their opinion vindicated.
Personally, I've yet to find a reason to even visit Facebook. I still have plenty of old friends - don't need any replacements yet, nor a different way to keep in touch with them.
Personally, I've yet to find a reason to even visit Facebook. I still have plenty of old friends - don't need any replacements yet, nor a different way to keep in touch with them.
Facebook is less about making new friends as it is about communicating. I know you mention that you don't need any new ways, and I used to agree with you, but the plethora of options it provides for pinging your friends makes it quick, easy, and fun to keep in touch with far more people than you would otherwise. I'm not saying it deserves the hype it's gotten, but I definitely think it has some value.
No, he was not an idiot, at least in my opinion. Nobody's done what they've done before. Practically everyone I've ever met can now get in touch with me. Nobody's ever created a platform like F8. A lot of people are still obsessed with Facebook.
The problems they have come from too much success, too soon, and some boneheaded mistakes that they made in the glare of a media spotlight.
The problems they have come from too much success, too soon, and some boneheaded mistakes that they made in the glare of a media spotlight.
The Register's fall is going to go unnoticed.
I wonder if it crosses the mind of anyone else that Microsoft is using its billions as weapons. Facebook is a massively successful site. But by investing in a small stake of a company at some huge, overestimate of a valuation, Microsoft is shuttering the valuation of Facebook, and pretty well all of social networking.
If that were true, then Facebook would have declined letting MS have a stake.
Rather than stunting social networking, it seems MS is just trying to get in the game, since their home-grown efforts to date have been lackluster.
Rather than stunting social networking, it seems MS is just trying to get in the game, since their home-grown efforts to date have been lackluster.
It might actually be an advantage to facebook to see the social networking investment market turn sour temporarily, to keep out big VC funded marketing campaigns that you have to do something to compete with.
Besides, typically, if someone is going to give you money at an absurd valuation, unless the terms are particularly onerous, it makes sense to take it.
Besides, typically, if someone is going to give you money at an absurd valuation, unless the terms are particularly onerous, it makes sense to take it.
Is Facebook worried more about competitors or sustainable revenues?
I don't have any friends there, so this is just speculation, but if I had to guess, I'd pick the latter.
You're right about accepting large valuation investments.
By the same token, it's hard to imagine the investor rooting for the company to fail, after having taken a stake (unless, of course, MS really has a Facebook killer waiting in the wings).
I don't have any friends there, so this is just speculation, but if I had to guess, I'd pick the latter.
You're right about accepting large valuation investments.
By the same token, it's hard to imagine the investor rooting for the company to fail, after having taken a stake (unless, of course, MS really has a Facebook killer waiting in the wings).
Revenues, revenues, REVENUES!! They've created wealth (something people want) but if they can't monetize it, they will fail as a company. Right now people are actively saying they want Facebook instead of its competitors by using it. Their competitors now are the Internet giants - Yahoo, Amazon, eBay, Google. Their size and valuation has put them in that category (not a niche startup) so now they need to find a way to earn billions to stay there.
A total of 400,000 seem to have become bored with the social network and didn't bother to return.
I guess I'm not the only one...
I guess I'm not the only one...
I became so bored with Facebook before I joined, that I never actually joined.
I don't know... we could simply be entering the trough phase of the hype cycle. What might follow is a wave of more interesting apps that bring traffic back in full force. Time will tell.
Well from my experience dealing with facebook's salespeople - it costs approximately $160,000 to have a facebook.com/mybusinessname page made for your company. So long as companies believe the social-media hype enough, facebook will be making money from at least that (and you'd be surprised at the companies that have already signed up).
Let's not forget the $1,000,000 initial retainer to do any kind of partnership with them (i.e., Beacon).
Let's not forget the $1,000,000 initial retainer to do any kind of partnership with them (i.e., Beacon).
plus the sponsoring of free gifts... I would be surprised if a round of free gifts was as cheap as one million.
Well... FaceBook has attracted quite a lot of money and a very serious number of smart folks who aren't sitting idle as we speak. They must be working on something: generating ideas, bouncing them off each other, coding, etc.
Articles like this one tend to neglect the fact that armies of smart people concentrated in one place worth not less (perhaps more) than previous achievements, be it user accounts, traffic or revenue.
Articles like this one tend to neglect the fact that armies of smart people concentrated in one place worth not less (perhaps more) than previous achievements, be it user accounts, traffic or revenue.
Some people keep using FaceBook because it doesn't easily let you delete your account and your peers have an expectation that your account should be current. In the long term this may work against FaceBook. The popularity of a social network site evaporates when the proportion of inactive web pages hits a threshold. A similar phenomen occurs in online games. The online worlds expand with the number of users but then interaction becomes very sparse when the number of users declines. This creates a downward spiral of decline. Anyhow, if FaceBook can reduce the prominance of dormant accounts and rely on peer pressure then an active user base can be maintained. However, social network sites don't have natural monopolies because sooner or later, you'll encounter a stage five clinger.
Many of the people I know are withdrawing their profiles from Facebook. Not deleting them, but removing 80% of the information.
Facebook is a LOUSY ad platform because users are interested in interacting with friends, not watching ads.
The subject is bang-on: Facebook's fall will be EPIC
Facebook is a LOUSY ad platform because users are interested in interacting with friends, not watching ads.
The subject is bang-on: Facebook's fall will be EPIC
The thing here is - for every social app, people are going to ask a) is it worth my effort to join this social network? or b) can this leverage my existing social network? And so, facebook, being the largest 2.0 social network becomes a cornerstone of the next generation of social apps.
I see it like the free-rider problem: facebook is like roads or plumbing or some other infrastructure, everybody profits from having one central established social network, but the reason it is in that position is because it's free. The hard part is just like paying for roads - you have to find a way of getting people to pay for it without diminishing its appeal
I see it like the free-rider problem: facebook is like roads or plumbing or some other infrastructure, everybody profits from having one central established social network, but the reason it is in that position is because it's free. The hard part is just like paying for roads - you have to find a way of getting people to pay for it without diminishing its appeal
I bet you Facebook has some statistical models that estimate when their user base will stop growing/start shrinking, so they probably knew at least a month ago that this would happen.
What would happen if they just said, "Okay, no more access to your site unless you pay 12 dollars a year". Or...no more than 50 page views a day without a subscription, or similar.
Would it be a total collapse? If advertising isn't working, well...
Would it be a total collapse? If advertising isn't working, well...
I think that would be a total collapse. Well, maybe not total, but there would be a flood of people leaving the service, for sure. I, for one, would not pay a cent to access Facebook. I just may copy down information for the people that I've gotten into touch with over Facebook and deactivate my account.
As for page views option, that wouldn't work either. I, personally, don't do more than 10 page views a day and most of my friends are the same. I suspect many people just check their profile, answer wall posts or messages, look at some apps and log out. There is not much there that can hold your attention.
All Facebook can really do now is pray that people still find it interesting. I think the Beacon was their attempt at monetizing the interest. That got shut down, so they're SOL.
As for page views option, that wouldn't work either. I, personally, don't do more than 10 page views a day and most of my friends are the same. I suspect many people just check their profile, answer wall posts or messages, look at some apps and log out. There is not much there that can hold your attention.
All Facebook can really do now is pray that people still find it interesting. I think the Beacon was their attempt at monetizing the interest. That got shut down, so they're SOL.
* I suspect many people just check their profile,...*
I suspect many people spend hours and hours on it. These are the ones who should, perhaps, be urged to pay. The light users are more likely to leave on any harassment.
I suspect many people spend hours and hours on it. These are the ones who should, perhaps, be urged to pay. The light users are more likely to leave on any harassment.
I can say with completely confidence that it would be a total collapse. Among the core of college students, almost no one is going to pay. And the site becomes practically useless once the penetration rate is no longer 100%.
Would it be a total collapse?
Possibly, because it wouldn't happen in isolation. Some still-free FB competitor would make a huge effort to get all the users who didn't want to pay, get most of them, and then most of the paying users would leave FB because their friends had.
Possibly, because it wouldn't happen in isolation. Some still-free FB competitor would make a huge effort to get all the users who didn't want to pay, get most of them, and then most of the paying users would leave FB because their friends had.
If history is any indication, then yes. The Dutch website http://www.schoolbank.nl that let you get back in touch with former school mates tried just that and saw their users leave, for example to the Dutch facebook workalike http://www.hyves.nl
Facebook's execs take great pains, at every opportunity, to point out that they don't plan to do this and that they see Facebook as an ad-supported product.
I think that they think that charging for access would be a disaster
I think that they think that charging for access would be a disaster
How many of you haters have a facebook account?
I only still have one because they won't let me delete it.
No, but in my last job, I ran an internal FaceBook Haters mailing list. Predictably, the people who worked the hardest didn't have time to create a FaceBook account. So, every other member of the mailing list was a member of FaceBook and didn't want be on the outside of this group.
Have, yes. Use regularly, no.
Not epic, just predictable.
Epic, in current internet meme speak, means great or huge. When they say that they're worth $15B and the reality strikes and they lose $10B off that valuation, the fall will be huge (especially to investors).
I don't see the reality of the old adage "A fool and his money are soon parted" as being epic though.
Bigger fools is all. I won't lament their loss.
Bigger fools is all. I won't lament their loss.
Having used Facebook exactly once to get at the thrift documentation, I won't miss it. However if it sinks it could take a good chunk of social-network investor confidence wiith it.
That said I think there are plenty of things Facebook could do to stave off a total collapse. Based on the success of the scrabble application, if I were them I'd make a big effort to become more integral to the online gaming community.
That said I think there are plenty of things Facebook could do to stave off a total collapse. Based on the success of the scrabble application, if I were them I'd make a big effort to become more integral to the online gaming community.
Part of me wants to be quick on the jump here and say Facebook can salvage the scraps by getting rid of the applications, but that'd be fallacy in it's highest regard. Applications for me are less about how annoying some of them can be, and how poorly they're implemented.
Those that require you to send invites to friends before you can make use of it, or simply requiring you to add the application just to see how someone has ranked you compared to the rest of your friends should get a slap on the wrist. It kills usability, and it hurts. I'll never use these apps, I'm just curious to see what my friend is trying to tell me.
Then again, at the same time you have applications that say you have a message waiting for you, when it's really nothing more than an invitation from someone else. Borderline Spam Marketing from your friends. And when your friends Spam you, what asylum is left?
Those that require you to send invites to friends before you can make use of it, or simply requiring you to add the application just to see how someone has ranked you compared to the rest of your friends should get a slap on the wrist. It kills usability, and it hurts. I'll never use these apps, I'm just curious to see what my friend is trying to tell me.
Then again, at the same time you have applications that say you have a message waiting for you, when it's really nothing more than an invitation from someone else. Borderline Spam Marketing from your friends. And when your friends Spam you, what asylum is left?
I think Facebook is trying to pull off a 'greater fool theory'... but they're running out of time since the hype cycle is on the way down.
http://en.wikipedia.org/wiki/Bigger_fool_theory
http://en.wikipedia.org/wiki/Bigger_fool_theory
True enough, but Z either got greedy or started drinking his own kool-aid.
$1B is a ton. He should have taken that and went laughing to the bank.
$1B is a ton. He should have taken that and went laughing to the bank.
I think both are true. He also had dreams of going IPO and being bigger than google. In the end, he just runs a site where people can send messages to each other.
10 years from now, facebook will be forgotten and social networks will seem even lamer than they do now. They are easy to build, and really they come down to this: messaging platform (like email except not as well developed) shared address book that allows you to navigate through to other people's address book (friend list) *basic personal website where you can easily put pictures and text up and have comments.
They consider themselves a platform for apps, but the apps are pretty lame, and just waste time.
10 years from now, facebook will be forgotten and social networks will seem even lamer than they do now. They are easy to build, and really they come down to this: messaging platform (like email except not as well developed) shared address book that allows you to navigate through to other people's address book (friend list) *basic personal website where you can easily put pictures and text up and have comments.
They consider themselves a platform for apps, but the apps are pretty lame, and just waste time.
"10 years from now, facebook will be forgotten and social networks will seem even lamer than they do now."
Agreed. The only thing these applications really do for people is to make it easy to stay in touch with their friends without resorting to more standard internet techniques such as instant messaging, email and personal websites.
Those are not things you need a specialized web application for and sooner or later the "average internet user" (the core consituency of these "social apps") will figure that out.
When that will happen exactly is simply a question of marketing. It's a lot easier to sell the proposition that "here's our social app, you can use it to let all your friends know what you're doing and it's going to allow long lost friends to find you" than it is to sell something like Wordpress, which, together with Google, can do the same thing.
In ten or twenty years everyone's just going to have a blog of some sort and we'll be using Google to find people. Facebook will be history.
Agreed. The only thing these applications really do for people is to make it easy to stay in touch with their friends without resorting to more standard internet techniques such as instant messaging, email and personal websites.
Those are not things you need a specialized web application for and sooner or later the "average internet user" (the core consituency of these "social apps") will figure that out.
When that will happen exactly is simply a question of marketing. It's a lot easier to sell the proposition that "here's our social app, you can use it to let all your friends know what you're doing and it's going to allow long lost friends to find you" than it is to sell something like Wordpress, which, together with Google, can do the same thing.
In ten or twenty years everyone's just going to have a blog of some sort and we'll be using Google to find people. Facebook will be history.
what "easy" means anw?
there are other challenges in a succesful social network or any other web service. Most web services technically can be leveraged to "easy" for a good hacker, but thats not the point.
Err, hasn't epic always meant something like that?
According to the Online Etymology Dictionary, "epic" originally meant "story or poem", which later became "grand or heroic". On the internet its meaning has shifted to indicate general extremeness -- much like the word "awesome" did in the 80's.
http://www.etymonline.com/index.php?search=epic
http://www.etymonline.com/index.php?search=epic
The hypothesis that high schoolers with Facebook profiles will continue to use them throughout life is only now being put to the test. And here's the thing: In high school, many people really care to know exactly what each of their classmates is doing and who they are dating. Sometimes that continues through college. But eventually people grow older, and they escape the social fishtank that is school, and they go out into the world... and, what do you know, eventually you stop hanging around with all of your school friends. You make a big show of keeping up with all of them for a while... but eventually it tapers down to sending Christmas cards now and then. You visit every few years. And you certainly don't visit them all.
I'm not saying that you'll ever stop using social networks. But there are a lot of social networks now. They're not that hard to develop, and they're just going to keep getting easier. And the result may well be that different people will gravitate to different ones as they go through life.
Facebook's counterargument is that they are going to be the generic platform on which all future special-purpose social nets will be based. But Facebook wasn't designed as a generic platform. It was designed as a social network for college students. And I'm not sure that opening the user base and tacking on a thousand third-party apps has really changed that. It's hard to take a tool that was carefully optimized for one task and repurpose it for N other tasks... especially when there are a thousand competitors with similar technology, and the lock-in isn't that strong.