Facebook: $750 Mil in Hand Worth More than $2Bil in Sky
It came up conversationally, but I believe I’m the only person at my company to have firsthand experience as a user of Facebook.com. It was kind of funny to have all these online advertising professionals asking me all about the website everybody used in college. Didn’t they get the memo? I’m new. I should be asking the questions around here. The subject of Facebook.com is an interesting one that’s worth a closer look.
Without question 2005 was the year of MySpace. Before Rupert Murdoch’s $580 million social networking venture took the interactive world by storm, it’s difficult to believe that even the most optimistic of the billionaire’s lackeys would have predicted that new acquisition would more than quadruple its reach within a matter of months. With 23.5 billion page views by February, MySpace became the second most trafficked site on the Internet.
Murdoch’s success naturally generated buying interest in anything deemed online social networking. One proposed deal in March 2006, was Viacom’s unsuccessful $750 million bid for Facebook.com, the phenomenon started by wunderkind Mark Zuckerberg. After Facebook.com declined the offer, its founders pegged Facebook.com’s worth at two billion dollars. Perhaps the brilliant sparks from MySpace’s success has blinded Facebook.com to the flipside reality of Friendster’s paradise lost. There’s a real chance Facebook won’t see an offer this generous again.
Facebook.com is essentially an online medium of communication for college students and high schoolers. For its valued reach Zuckerberg and his crew of Harvard dropouts (taking their cue from Bill Gates, no doubt) must be looking for Google-sized compensation, but the two billion dollar figure is arbitrary and difficult to justify. Perhaps Facebook is emboldened by their own wise decision in not selling to Yahoo for $15 million in 2004.
Zuckerberg was likely trying to establish a market value for his creation, not an unwise move on the face of things. However, Viacom’s offer was not by any stretch of the imagination pocket change and the number of entities that can and will double the bid Facebook already got is finite.
Facebook’s traffic numbers, as referenced on Alexa.com, during the last three months are not encouraging; that is, if the goal is to fish for more and greater buyout bids. The numbers actually have trended downward since March, anathema for enticing hyper bidding growth. These diminishing statistics can be at least partially attributed to the cyclical nature of the school year since Facebook, after all, is geared towards the college student. It doesn’t matter how great the product is, it won’t keep students from doing their own thing during summer vacation and this yearly dip is potentially damaging.
Seeing as how fast online fads can expand and contract in social networking as we’ve seen in its short time span, what if the numbers don’t come back? What if something new pops up in two months that steals Facebook’s thunder? (And, again, MySpace’s success serves as good reason why this thunder is worth stealing.)
Facebook.com’s success has also been marred with some controversy that could taint its popularity with students. At Syracuse University a flap over freedom of expression ensued when a Facebook.com group went overboard in critiquing a student teacher and ended up with expulsions from the class and social suspension before three students transferred. After Penn State’s football team beat Ohio State this year students rushed the field and made a ruckus. Overwhelmed police made only two arrests that day, but later in the week they logged onto Facebook.com and, like Canadian Mounties who always get their man, got plenty of names and faces and photos from the info posted by students about their on-field shenanigans. Kids talk and these stories spread like wildfire, which may affect Facebook.com negatively – they can’t control misuse of their product and the negative repercussions that come from it.
The future is promising for the social networking business space and I don’t believe Facebook.com is doomed. Still, given the nature of short-lived and over-hyped dotcoms, Facebook may have reached their growth climax this school year, with possibility for expansion and success only contingent on acquisition. Time may not be on their side because as the pages of the calendar turn there will doubtlessly be new fads and trends that will threaten to make something else the “Next Big Thing” at Facebook.com’s expense. The clock is ticking.