Facebook is in the news again today having apparently surpassing Google’s main search page in traffic, at least for a minute or two. However interesting the news might be however, a lot depends on how we measure traffic, as well as what happens when people arrive at our destinations. Facebook, now in deep to investors to the tune of $716 million, has since its inception 6 years ago still not brought in significant revenue, if any at all.
Facebook, regardless of its viability, is one of the most interesting startup companies ever launched. The core value of the platform being primarily two fold. First, the company is able to add function significantly through the efforts of other people (ala Wikipedia except via apps, and etc.). Secondly, without undue effort developmentally, the platform manages to attract millions of people. Facebook as a thing is sort of like a giant telephone pole where people put up their digital flyers, all be it fairly interactive ones. The biggest thing Facebook has going for it is the brand actually.
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Enough of what Facebook is and is not, this news about competing with Google is stressful for several reasons. Silicon Valley and other investors have propped up so much of their expenditures using raw numbers, it seems like at least one expert would call “foul” on Facebook and other over-valued commodities just based on some kind of hype index. Maybe the biggest problem with Facebook is the secrecy surrounding their monetization – the dotted line at the end of the online business contract. Rumor has it Facebook actually turned a profit! Woo-Hoo! I am sure this makes investors feel fuzzy.
The point here is, it makes little difference if Facebook get 6 billion users if only 1 in 10,000 pay a tiny chunk of the freight. Super nerd Mark Zuckerberg has become adept at “ring around the rosey” when it comes to broadcasting anything but traffic variables. Meanwhile, back at the reality ranch, Google and Amazon turn the keys to their monetization machine daily – and send the news out. Google started with $25.1 million and at last tally made a nearly pure profit of $6.67 billion – 17 percent above 2008’s numbers. As for Amazon, company sales by the end of 2009 reached almost $10 billion during the worst economic downturn in seven decades. Interestingly, unlike Facebook, their bandwidth is paid for nearly instantly when people visit.
Rumors of El Dorado
An Inside Facebook article run a couple of weeks ago, and subsequently paraphrased by most of techdom, suggested Facebook’s 2009 revenue at something like $635 million dollars. The article hums and haws, back and forth, about sources for this and that, but basically leaves anyone with half a brain wanting for anything remotely concrete. I always ask the question; “How much does the bandwidth cost?” But, no one has ever answered this of course. We do not need to get into a net profit argument here. Unless Zuckerberg and his board are planning on astounding us with a huge continent buying profit, it seems like if Facebook made any real money they would have told someone.
A report on bandwidth usage (PDF) by major Internet companies back in 2007 showed Facebook gobbling up nearly five times as much as Google or even YouTube. Just paying 1000 employees rock bottom wages would set Facebook back over $40 million not counting perks, and consider buying Friendfeed at nearly $50 million against their supposed winnings. All in all, the picture could easily look a lot like smoke and mirrors than reality.
Facebook has a unique opportunity, I have always said this. But, if we look at TechCrunch’s Dead Pool for a minute or two we can see hundreds of startups people wanted to prop up with speculative dollars all based on traffic numbers. Untold millions, maybe even billions, were invested in this kind of “say it is so” speculative behavior. All those clams are back in the bottom of the ocean leaving thousands of would be fishermen staring at a line with the hook gone.
Even the numbers given Facebook’s latest hurray don’t match up. Looking at Compete, Quantcast, and the blunt tool of Alexa – Facebook gets a bunch of page views and a pat on the back because 400 million people have contact with some pals, or because Facebook connect graciously allowed them to sign in while they went elsewhere.
Show Us the Money
I would love it if Facebook cleared $10 billion this quarter. But, I would love it almost as much if they would put up or have their mouth pieces shut up. Look at it this way for a second; about 4.5 billion people watch television, but nearly every broadcast (even some cable, but we are talking via airwaves) station out there is broke or going there. Just having people who will watch (visit) has very little to do with floating a business. Google on the other hand offers a unique value in stuff and ways to find stuff – and they make money off it. Maybe tomorrow Zuckerberg will post a financial showing how well they are doing? Then I will shut the hell up.