There’s been a lot of press around the Facebook share flotation recently, a lot of it negative, both before and after the flotation.
Most of it centres on the monumental valuation, and the amount they were looking for per share. Many analysts asked how you could justify such a high valuation when Facebook were only making around $3 per user in actual revenue.
Talking about ignoring the bleeding obvious. Yeah, maybe it started overpriced – the market soon sorted that out – but what would you rather invest in:
1. A mature company with mature products and customer base looking for capital to expand still further, into unknown territory, perhaps, or
2. A new and energetic company that has spent years building a massive customer base (900 million, in fact) and has barely scratched the surface of captialising on these customers?
Starting from that low point of around $4 revenue per customer per year, the potential for growth is absolutely enournous. And, Facebook has shown in the past that in this new online age, you can try something, fail, and move on pretty quickly without people really noticing. In many ways, the more failures you can have, and get over, the more successes you’re likely to have.
I think many observers also thought “they aren’t making much money from Advertising, and there may not be much room for advertising growth, so how can they grow revenue”?
This fundamentally misunderstands the what Facebook offers. As I stated in a previous blog, Advertising is just a tiny part of where Facebook could head. In reality, the company who really needs to be quaking are not other social media outlets, but Amazon. If Facebook has the potential to get products people want in front of them when they are not looking for them – a big jump on sites like Amazon where you have to be looking for something to be exposed to other potential purchases.
Indeed, the natural continuation of this thought is that Amazon needs to become a much more social experience. Maybe then facebook would have a real rival. At this point it doesn’t. I await the next move with baited breath.