I just read about Facebook’s latest money bank donation to their cause from Russia’s Digital Sky Technologies, and it made me think of all the articles I have written questioning the reasoning behind endeavors like Facebook. The Silicon Alley Insider story about this $200 million for Facebook’s light and water bills also made me realize stupidity is an International commodity.
Author Nicholas Carlson pretty much hits the nail on the head by translating Facebook CEO Mark Zuckerberg’s rhetoric into actual reality. In this case, revealing that Facebook is buying time rather than getting more “flexibility”. This story and others again put Facebook’s self embossed valuation in flux, as the company valuation is now set at $10 billion. I think pretty soon, even the most obtuse investors will catch up with reality and ask the most pertinent question; “And just when can we expect to see a profit on our money?” Does anyone know what air, 4 million marketers, talk, and a photo album are worth minus over $200 million a year in expenses?
I could take hours to piece together evidence, as I have in the past, pointing to the frivolity and wishful thinking that has powered what is now a three quarter of a billion dollar money pit, but for once I think I will just make this an opinion piece. Forgive me, but Facebook, for all its notoriety, is not worth even one attentive hour of my time, let alone yours. Even according to Zuckerberg, on many occasions, making money is the least of his concerns. All I can say is, if altruism and allowing the rest of the world to build stuff for one’s website can monetize people indefinitely, sign me up, I am due. Just what the hell kind of answers are these guys giving investors?
Aside all Facebook’s posturing about new wave advertising (which we know they would love else to create), legends of bringing about world peace, and of course their legendary ability to grab cash in the truck loads, there is the rub – paying the bills. Zuckerberg says now, he expects Facebook to go cash positive in 2010. Okay, what does that mean exactly?
Looking at all their money woes from another angle, consider if one in ten Facebook users click on something, anything. If 6 percent of those actually buy a $10 book or cheap tune, what would the bottom line be? Well, with 200 million users, 6 percent of 20 million is 1.2 million, if I am right. Using my Facebook math here, let’s see, that is, uh, $12 million in revenue to the “advertiser”, I think.
So, to be profitable with $150 in negative cash flow, Facebook is going to have to have one hell of a conversion rate, or a lot more expensive commodities to pitch. On a personal note, a good friend told me these guys are geniuses not so long ago. When responding to one of my scathing article, this CEO seemed enthralled with the acumen of the Facebook board. My view is, anything this weird is more than a little bit scary to me.