7 ms·

"THOMPSON: Is Facebook worth $100 billion? BLANK: In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce

by JPKab 14y ago

"THOMPSON: Is Facebook worth $100 billion? BLANK: In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money. They're debating how much more valuable Facebook's hundreds of millions of users can be, and how fast can they can grow that value. That's an execution problem." Facebook makes $4 per user from advertisers who LOSE money when they pay Facebook. In other words, Facebook's users LOVE their product. Facebook's customers (advertisers) get nothing from it. Click through rates suck, and actual ROI is negative. Eventually, the new advertisers who show up and realize it's a waste of money will stop paying for nothing, and then the $4/user goes away. Users and the media LOVED Groupon. The businesses who were Groupon's actual customers HATED it. This is no different. Don't get me wrong, a billion users is incredibly monetizable. Just not the way Facebook is trying to do it. The social B.S. will eventually fade to the real stuff.

waterlesscloud 14y ago
What's the real stuff?
- JPKab 14y ago
  Cars that drive themselves. Distributed power generation. Web connected sensors in everything. You know, things that have a material effect on people's quality of life. As opposed to Facebook.
  - pnathan 14y ago
    It's important to realize that Facebook has done a tremendous job of connecting the non-digerati who previously communicated via infrequent mail or rare phone calls. While I am very bearish on a 100 P/E, the reality of Facebook's userbase and its engagement is not something to blow off. Facebook has distinctly impressed itself on the communication modality of many many people. Don't underestimate that.
  - b_emery 14y ago
    > things that have a material effect on people's quality of life. As opposed to Facebook. As much as I dislike Facebook, there is some scientific evidence that increasing one's social ties produces measurable improvements to health, including longevity. If Facebook increases social connectivity, which in my limited experience it does, it's not a stretch to suggest that it could materially improve one's quality of life. My money's still on google though for the long run ...
    - ericd 14y ago
      I believe that that evidence is based on close friends. I think Facebook tends to make it easier to maintain lots of light friendships, but doesn't do much for close friendships.
    - tsotha 14y ago
      >As much as I dislike Facebook, there is some scientific evidence that increasing one's social ties produces measurable improvements to health, including longevity. Yes, increasing those ties in person. I have yet to see any evidence social media has the same effect. Also, those studies may have the causality arrow going the wrong way. Sick people tend to stay at home and not get out much, so it may be that you're more likely to have social ties if you're healthy than the other way around.
      - forensic 14y ago
        >I have yet to see any evidence social media has the same effect. Have you looked for these studies? Are you an expert on this corner of the literature? There have been studies and they do show that internet socialization has an effect on a variety of relevant measurements. To summarize, Internet socialization is not equivalent to face-to-face socialization but it does provide some of the benefits and is also able to provide benefits that face-to-face cannot provide. I find it strange how people such as yourself will make statements about the literature as if your opinion had value. Your opinion about the literature is only valuable if you have studied the literature. If you have not, then you should remain silent if you want to be a valuable contributor.
  - deleted 14y ago
    [deleted]
  - sigkill 14y ago
    Facebook(the platform, not the company) was pretty instrumental for the Arab Spring.
    - foobarqux 14y ago
      Mark Zuckerberg doesn't think so. http://www.charlierose.com/view/clip/12125 http://www.charlierose.com/view/clip/12125
asto 14y ago
It depends on what the users are using. I think it's extremely hard to get people on a platform to socialise* and then get them to do something else that generates revenue. With the exception of purchasing game credits etc, there's no easy way to do it. * blanket term for status/photo/video sharing
earl 14y ago
One, you presume that advertisers are incredibly naive and don't measure returns. Obviously cleanly measuring advertising returns from fb is hard, but it's still being done. Second, fb can put up the first credible alternative to adsense since they collect browsing info from their fb login and other widgets. In fact, they can do better than adsense: fb can mix in very accurate demographics alongside the page context. Adsense makes google nearly $10B/year and I'd bet fb could eat half of that. And many pubs that lean heavily on adsense are desperate for a competitor. So I'd say fb is -- at bare minimum -- a $5B/year company. Plus another billion or two from taxing every bit of money that flows through social gaming. Plus it seems like zynga will be able to do poker for money now. Plus I don't believe all the ads on fb proper are worthless, so roll that into the mix. Finally, from your comments below, you seem to think advertising in general is worthless. If you think companies (US only) spend $400B/year because they're stupid, then I'm too dumbfounded to formulate a response.
- JPKab 14y ago
  http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-lost-my-faith-in-facebook-advertising/ http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-los... Advertising isn't worthless, but advertisers are very naive. You talk about companies spending money because they are stupid. I SUSPECT, but only Facebook has the data to KNOW, that there is a high turnover in companies advertising on Facebook. New companies coming in every day, but also many who realize they aren't getting a return on investment and leaving. I think a lot of big companies advertise on it strictly for brand presence, rather than for direct sales. That's fine. But let's not pretend that there is remotely the click-thru rate that Google has.
  - earl 14y ago
    You realize that brand advertising isn't measured via clickthrough, right? Most people on the net don't click -- see the infamous natural born clickers study. Yet nonetheless, brand advertising via display can be demonstrated to be very effective on an roas basis via A/B testing by geo. Also -- ctr doesn't matter as long as your cpc compares. So 1/100 the ctr is fine w/ 1/100 the price, etc.
- 14y ago
skmurphy 14y ago
The advertisers are the customers, they are the ones paying Facebook. The 'users' are the audience that the advertisers are paying to reach.

by JPKab 14y ago

waterlesscloud 14y ago

What's the real stuff?

JPKab 14y ago
Cars that drive themselves. Distributed power generation. Web connected sensors in everything. You know, things that have a material effect on people's quality of life. As opposed to Facebook.
- pnathan 14y ago
  It's important to realize that Facebook has done a tremendous job of connecting the non-digerati who previously communicated via infrequent mail or rare phone calls. While I am very bearish on a 100 P/E, the reality of Facebook's userbase and its engagement is not something to blow off. Facebook has distinctly impressed itself on the communication modality of many many people. Don't underestimate that.
- b_emery 14y ago
  > things that have a material effect on people's quality of life. As opposed to Facebook. As much as I dislike Facebook, there is some scientific evidence that increasing one's social ties produces measurable improvements to health, including longevity. If Facebook increases social connectivity, which in my limited experience it does, it's not a stretch to suggest that it could materially improve one's quality of life. My money's still on google though for the long run ...
  - ericd 14y ago
    I believe that that evidence is based on close friends. I think Facebook tends to make it easier to maintain lots of light friendships, but doesn't do much for close friendships.
  - tsotha 14y ago
    >As much as I dislike Facebook, there is some scientific evidence that increasing one's social ties produces measurable improvements to health, including longevity. Yes, increasing those ties in person. I have yet to see any evidence social media has the same effect. Also, those studies may have the causality arrow going the wrong way. Sick people tend to stay at home and not get out much, so it may be that you're more likely to have social ties if you're healthy than the other way around.
    - forensic 14y ago
      >I have yet to see any evidence social media has the same effect. Have you looked for these studies? Are you an expert on this corner of the literature? There have been studies and they do show that internet socialization has an effect on a variety of relevant measurements. To summarize, Internet socialization is not equivalent to face-to-face socialization but it does provide some of the benefits and is also able to provide benefits that face-to-face cannot provide. I find it strange how people such as yourself will make statements about the literature as if your opinion had value. Your opinion about the literature is only valuable if you have studied the literature. If you have not, then you should remain silent if you want to be a valuable contributor.
- deleted 14y ago
  [deleted]
- sigkill 14y ago
  Facebook(the platform, not the company) was pretty instrumental for the Arab Spring.
  - foobarqux 14y ago
    Mark Zuckerberg doesn't think so. http://www.charlierose.com/view/clip/12125 http://www.charlierose.com/view/clip/12125

asto 14y ago

It depends on what the users are using. I think it's extremely hard to get people on a platform to socialise* and then get them to do something else that generates revenue. With the exception of purchasing game credits etc, there's no easy way to do it. * blanket term for status/photo/video sharing

earl 14y ago

One, you presume that advertisers are incredibly naive and don't measure returns. Obviously cleanly measuring advertising returns from fb is hard, but it's still being done. Second, fb can put up the first credible alternative to adsense since they collect browsing info from their fb login and other widgets. In fact, they can do better than adsense: fb can mix in very accurate demographics alongside the page context. Adsense makes google nearly $10B/year and I'd bet fb could eat half of that. And many pubs that lean heavily on adsense are desperate for a competitor. So I'd say fb is -- at bare minimum -- a $5B/year company. Plus another billion or two from taxing every bit of money that flows through social gaming. Plus it seems like zynga will be able to do poker for money now. Plus I don't believe all the ads on fb proper are worthless, so roll that into the mix. Finally, from your comments below, you seem to think advertising in general is worthless. If you think companies (US only) spend $400B/year because they're stupid, then I'm too dumbfounded to formulate a response.

JPKab 14y ago
http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-lost-my-faith-in-facebook-advertising/ http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-los... Advertising isn't worthless, but advertisers are very naive. You talk about companies spending money because they are stupid. I SUSPECT, but only Facebook has the data to KNOW, that there is a high turnover in companies advertising on Facebook. New companies coming in every day, but also many who realize they aren't getting a return on investment and leaving. I think a lot of big companies advertise on it strictly for brand presence, rather than for direct sales. That's fine. But let's not pretend that there is remotely the click-thru rate that Google has.
- earl 14y ago
  You realize that brand advertising isn't measured via clickthrough, right? Most people on the net don't click -- see the infamous natural born clickers study. Yet nonetheless, brand advertising via display can be demonstrated to be very effective on an roas basis via A/B testing by geo. Also -- ctr doesn't matter as long as your cpc compares. So 1/100 the ctr is fine w/ 1/100 the price, etc.
14y ago

skmurphy 14y ago

The advertisers are the customers, they are the ones paying Facebook. The 'users' are the audience that the advertisers are paying to reach.