Is Facebook overvalued? Will it fail?

Posted on January 16, 2011 by Sy

This question has popped up a lot since their recent $50 Billion valuation (albeit, speculators on secondmarket.com are trading Facebook ‘shares’ at a Market Cap of $70+ Billion). For those who lived through the .com bubble, alarm bells are no doubt ringing.

Does the massive growth they have experienced mean they will go the way of so many .com companies in the 90s?

Lessons from history
Facebook has avoided acquisitions, and is being advised by Sillicon Valley’s experienced heads. Peter Theil (PayPal founder), Reid Hoffman (LinkedIn founder), Sean Parker (Napster co-founder) have all been there.

Mark Zuckerberg is benefiting from their experience, and picks the brains of Steve Jobs, Tim O’Reilly and his trusted leuitennant Sheryl Sandberg (who build the Google Revenue model) regularly.

Yahoo, Google & Microsoft have all tried to buy Facebook, as has Time Warner and News Corp. If anything Facebook appears to have learned the lessons of what not to do from the .com bubble, very well.

Workable Revenue Model
The major difference is Sheryl Sandberg’s ability to build revenue from advertising. Facebook have figured out how to drive demand with advertising, as opposed to fulfilling a need like Google does. A young father with very few pictures will get an advert for a digital camera. In Google you have to know what’s missing, and Sandberg did a pretty good job with revenue there.

Facebook has nearly 600 million users, and they haven’t really focussed on anything other than growth yet. What happen’s when their core focus shifts from growth in terms of users, to growth in terms of revenue?

Challenges
In order to reach that point they will have to successfully

Break China
Complete an IPO
Become a part of internet infrastructure

Those are some big challenges, and I await with baited breath to see how Facebook tackle them. Facebook can still gradually fail, but it would likely be a steady decline rather than the rapid nose dive Myspace experienced.

NewsCorp’s takeover of Myspace was a revenue buy. Buying revenue so early in a company’s life before it has matured stunts it’s growth.

If building such a massive service didn’t make or cost money, I’m pretty certain Mark Zuckerberg would still be building it. He’s not in it for the money, and in a strange way, that commitment to quality is what drives their continued success.

Economic Impact
Facebook grew in size, and took on massive investments throughout the worst financial crisis since the great depression. To me that suggests we’re dealing with a very different type of organisation.

Expecting Facebook to become a sustainable business while it is still growing is missing the point. For now revenue isn’t their key goal, they want to change the internet, make it more open and useful. I doubt they will IPO until they get much closer to that goal.

Success Factors
If something far better than Facebook comes along then sure it could go the way of the old AOL, but it would have to:

Compete on products quality (Photos, News Feed, Events)
Compete on ease of use (Parents can use it)
Compete on network size (Network effect)
Build a successful revenue model
Gain massive investment from VCs and existing tech companies

In short, the competition has a mountain to climb. The one remaining huge hole in facebook is the differentiation between relationships. It assumes everyone is a ‘friend’. If a service could plug that gap, and grow at a similar ‘Moore’s law like’ pace they’d be set.

Google tried and failed. Myspace tried and failed. Twitter serves a different purpose. Facebook’s main competition is geographic (Russia and China). It’s going to take something very special indeed to dislodge Facebook. Building a successful social network isn’t easy!

How do you compete with Facebook?

In my view you don’t compete. You work with. Facebook has the social graph, and likely will for some years to come in the western world.

Do you think Facebook is overvalued?
Do you think it will fail?
How can Facebook sustain their growth?
What big challenges does it face?

Understanding Social Media – Four Steps to Social Media Revenue

Posted on January 2, 2011 by Sy

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Social Media is very much the buzzword at the moment, because the board level execs, and therefore middle management have recognised the massive user base. Their thinking is along the lines of “We know there are a lot of users there, can we plug what we do today into that?”

In a word, No! It’s a very different space.

Before you can plug your product into a social space, your brand and business needs to be on there. You’re dealing with real people in a much more intimate way than via a call centre or your website. The rules are different. Before you can even think about making money from it, you have to accept you have some learning to do. Then we can talk about monetisation strategy.

Four Levels of Engagement

Joe Wiggins at Perfect Circle PR, lists the four levels of engagement in the financial sector.

Let’s Be Social – simply using social technology to build the brand and community

Enlightened Engagement – informing customers through reviews, experts or other respected sources

Store of the Community – customers help drive product selection assortment and merchandising

Frictionless Commerce – the buying experience is completely redesigned to create a fully customer-centric experience

Let’s be social

Step 1 “Let’s be social” whilst a starting point, is usually a siren of a business who’s marketing department convinced the board that they needed to “just put out press releases” because the competition is doing that. This is akin to using a telephone for morse code, a waste of potential, but a step in the right direction

Enlightened Engagement

This usually happens when someone high up in the business has the Eureka moment and gets it. It’s when the business recognises that their customers are talking to each other, and their friends about the business and interactions with your company.

It’s a paradigm shift. Not everyone outside your employee list is against you. In fact, some of them really like you and want you to succeed!

Social Media gives you insight to those conversations, and as an insight & perception management tool is invaluable. This is real time feedback, from people who want to help your brand or business.

Store of the community

Also known as an “App Store”, is a big topc in itself, and a massive investment for businesses that are not already on the cloud infrastructure route.

The idea of having an ecosystem and marketplace of developers vying to make your channels better, for free seems like a tempting one. It’s entirely possible with the developments in coporate IT Infrastructure and software to begin to make your services open for integration with clients, or 3rd party systems. PayPal X is a solid example of how to do this in a gentle, risk averse way.

An open platform a huge stepping stone onto the quest for the holy grail…

Frictionless Payments

I’m willing to bet everyone see’s the value in this, pay any merchant from any account, anywhere. On a pure technology roadmap, you could certainly get there without going social… but then how do you interact with this new world of Social Networks once you get there?

You may have the worlds greatest product, but if it doesn’t play well with social networks you’re stuffed. More importantly, if your business doesn’t support it on the human level, consumers won’t trust you, and the service will fail.

That’s why it is vital your business follows the social and open technology and values equally. It’s as much about how you do business, as the technology.

Spend time getting to know your professional and human audience. Listen to them. Interact. Then let them build the services they want, on top of your core value! In effect the community will do the integration for you, you just have to open the front door, by being a platform.

What do you think?

Will business truly embrace social?
How would you implement it?

How will your company move to the cloud?

Posted on September 24, 2010 by Sy

Reading Mashable’s article about the new Box.net cloud storage app got me thinking. If their goal really is to allow individuals to be able to access their work documents remotely via the cloud, the piece that is missing isn’t the cloud or the mobile app. The mobile app has matured quite nicely into a feature rich, usable piece of software.

In fact what appears to be missing, is the understanding in business. Corporates have enough trouble trying to sell their product & make next year’s revenue numbers.

Teach a man to fish

The consultancy that teaches a business how to integrate & transition away from their expensive internal Intranet towards cloud based storage solutions is completely missing (or it’s trying to sell you Tivoli software).

As corporate, I’d want someone who could build an interface to my existing file servers, and make my existing Microsoft Office documents available through the cloud.

User Driven IT

As the Security specialist firm RSA reports, the rise of user driven IT means the days of buying your employees hardware are over.

A laptop, a secure intranet & your own data centre are very expensive! The new model is having your data hosted outside your business, and employee’s accessing using their own devices. We’re already seeing this start with those pesky CEO’s and CTO’s using their iPads & personal notebook’s in business.

Real cost savings?

In effect this is a double edged sword for business. With one hand you can save a lot of cost by reducing hardware investment. With the other, you introduce a massive security risk.

If you can’t secure the device & your workers are buying their own IT equipment, how do build the interface and policy /procedures required to get you from your existing internal Intranet to a cloud based solution?

Consider your information touchpoints

When does data enter & exit your business’s confidentiality boundary?
What quality checks can you perform data entry & data exit?
What tools do you need to perform quality checks?
What policies and procedures do you need to develop to enforce these checks?

In effect you can no longer control an employee’s behaviour hour to hour, but you can control data entry, exit & quality inside your business boundary.

Time to invest?

The cloud is a massive cost saving tool, it allows you to leverage existing / free tool’s and networks in an employee’s home life. This is a potentially invaluable asset. The way we look at our business will fundamentally change. Do you think business will embrace the cloud any time soon? What else do they need to consider?

The Social Media Vibe

Posted on December 2, 2009 by Sy

“The vibe” is something that you either love or hate about twitter, and social media. Like everything that is a trend, from the outside it is downright annoying. Partially because everyone won’t shut up about it. The criticism is that all people do on twitter is talk about their love of twitter. (Unless they’re the celeb stalker type, I’m looking at you Justin Beiber fans).

But is there something to this twitter thing?

The mainstream media loves to talk about how big Facebook got on a slow news day, but you get the sense they still don’t take it as seriously as they could… and I’m beginning to think the gap is generational. For this post to make sense, we’re going to have to generalise a little, but here goes:

Baby Boomers – Born Prior to 1961

The Baby Boomers still occupy the prominent social & business positions, their thinking is the status quo for how business and society reacts to new trends. Their lens, is the lens we have used successfully for a very long time. Kudos to the Baby Boomers. Things are a changin’ though…

Generation X – Born between 1961 and 1981

Generation X or the “MTV” Generation is often cited as the rebel generation and is a little more reactive. Responsible for the .com boom, the growth of the personal technology industry and further liberalisation of media Generation X lived up to its name. It still did all of this through the Baby Boomer lens of Globalisation…

Generation Y – Born between 1976 and 1990

Generation Y is the favourite of AdAge and a whole lot of PR / Marketing companies right now. Understanding Generation Y, is fundamental to getting the Social Media Vibe. Having grown up with technology and to a lesser extent the internet, as a generation; Y see’s nothing wrong with giving away its data to the information for convenience. Facebook and Google are trusted because they are Trust Agents, ie. They are trust worthy in the eyes of todays youth.

Social media has real value to these Generation Y types. Not because it’s a fad, but because it fits the way they see the world. These views are challenging convention and causing an awful lot of upheaval in the old economy. Just look at how unhappy News Corp is with Google, or the Advertising revenues of Newspapers. The Baby Boomers and Generation X take some level of comfort from the human interaction, but the very key of Social Media is humanising our online interactions. Being ourselves online.

It leads to a lot of philosophical questions. Am I more myself online? In person? Alone? Outdoors?

These kinds of questions don’t sit well with the old world, since they challenge some pretty fundemental beliefs. The key is how this change will impact YOU. The way we interact is changing. Knowing the change is coming means you can take action today to be ready as these changes begin sweeping through into daily life, and business as usual. No matter what age you are, these trends beg some very interesting questions indeed.

Maybe you could pitch social media to your company?
Maybe you could start a blog and begin building your digital identitiy?
How about looking into this Social Media thing, are you part of the conversation?
Does this Generation Y lot have a point?

Or you could just wake when the change has already happened. You don’t have to do anything, you lucky thing! There is an awful lot to be gained by taking advantage though. Worth a shot right?

Oh and a word to the wise. High pressure sales don’t trick anyone but other high pressure sales types. Snake Oil is endangered.

New music, New Social Networking, New Cloud?

Posted on February 23, 2009 by Sy

Yes, I do love the new TI & Justin Timberlake song. The production is stunning, it has strings and hippety hop all in the same song. It’s well done, catchy and has a good message. Still there are a few things in there that are annoying. Hip hop has this whole “eyyyyyyy, ohhhhhhhh” thing going on which could be more annoying than stubbing your toe.

After a month or so on Twitter I think I finally get it. By blogging about it, I also join the ranks of the millions of people who do nothing but twitter on about twitter. It’s brilliance is that people actually write what they are interested in or up to. With blogs people try to be interesting, or at least have enough content to fill a blog. The character limit and the the URL linking you can be on the bleeding edge of any subject within a matter of seconds.

It got me thinking.

Doesn’t email seem like a long time ago now? Why don’t all my other services work like twitter, with lots of interesting apps and ways to organise data streaming from what is otherwise pretty unorganised. My MP3s are sorted by artist, my movies by year… but if the Cloud netowork or Semantic web is so smart… Why can’t it join up all my data too and sort it in the way twitter does.

The beauty of the cloud is that it works with tripples. That means that we have more than just data and it’s title. We know how it relates to other data instantly. A cloud network knows the difference between an MP3 and an avi. It could then sort that data for you, or search it… or tell you who of your friends also has it. Or what they thought of it if they blogged, tweeted or posted on a forum about it.

Services like glue are heading in that direction… but until someone joins the dots. We have a lot of floating data that isn’t working as hard is it could. If I want to learn about a subject, or have been given a task I don’t know how to complete as a competant net savvy member of Generation Y I would have gone to google or wikipedia and found something

Now I’m including twitter in that search. That shift is seismic and it’s coming.