Facebook in goldmine potential deficit
I know, shocking... bitch
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Social networking sites will start going titsup in 2009, according to analysts, and may begin trying to charge users for the ability to publish videos of their cat playing the piano.
The wheels have been coming off the Web 2.0 bandwagon for a few months now. News that the "Long Tail" theory - an article of faith for True Believers - doesn't fit the real world was broken here in November. And now, on less philosophical ground, Deloitte has come to the stunning conclusion that providing unlimited online storage for everyone, forever, isn't necessarily the best idea for a business anyone ever had.
"The book value of some social networks may be written down and some companies may fail altogether if funding dries up," said Paul Lee, Deloitte director of research for technology and telecommunications, the Telegraph reports.
En Anglais, that means too much was paid for the social networks that have been acquired (see AOL's insane $850m purchase of Bebo, and CBS' $280m Last.fm punt), and the ones that haven't will struggle to get more cash from witless venture capitalists.
"Average revenue per user for some of the largest new media sites is measured in just pennies per month, not pounds," Lee said. "This compares with a typical average revenue per user of tens of dollars for a cable subscriber, a regular newspaper reader or a movie fan." Microsoft's investment in Facebook in October 2007 valued its then-50 million users at $300 each.
On a social network, you're the product rather than the customer. In fact that's completely true of all ad-supported websites including El Reg, and true to varying degrees for all media. But as it transpires, the difference is that on Facebook you and your friends just aren't worth very much at all.
The social networking boom (in users, not revenues, you understand) was fired by free software and cheap storage - it's just not cheap enough. We witnessed the early effects of that fact with the closure of also-ran video site Stage6 earlier this year.
"Many of the most popular social networks, such as Facebook and Twitter, do not yet generate large profits," the Telegraph informs us.
That's technically accurate and very truthy, but here's a true version: Many of the popular social networks, such as Facebook and Twitter, do not generate any profits, and perhaps never will. In fact, Twitter not only doesn't generate large profits, it doesn't generate any revenues. None at all.
Facebook meanwhile has revenues, thanks to ad deals cut as its buzz peaked in 2007. In net it is losing hundreds of millions of dollars to build the world's largest database of personal trivia. Its most likely fate is as the subject of a small acquisition in the next two years that ought to prompt blushes at Redmond over the $240m Microsoft paid for a mere 1.6 per cent of preferred Facebook stock. The likely buyer will be the owner of a web search business (Google, Microsoft, Yahoo!), who will use Facebook as a loss leader to send queries through its contextual text ads system. To see this in action revisit Google's $1.6bn acquisition of YouTube. ®
COMMENTS
From a website owner
Okay, so I own a small website that is not quite web 2.0 (I hate web 2.0). However, the site is based around writers publishing their work for free on the site as a form of publicity. I can actually afford to run it out of my own pocket for a while as costs are less than £50 per year. However, I can see that if I were to expand beyond my current finances that the site would go tits-up. Now, if I want to expand I put an ad or two on the site and hope to see some revenue. Based on any said revenue I expand the site accordingly. That is a sustainable (or as sustainable as possible) model. The problem with FB et al is that they have expanded beyond their means. If they had stayed as a 18+ site only instead of allowing 13+ to join, there would be fewer numbers and more managble, as those are the targets of the adverts. Add to this the recent and unpopular redevelopment and redesign of the site and you have a big loss of money.
In short...these people haven't a clue. If they did the sites wouldn't grow too large for them to handle.
facepuke
OK - i'll admit it. i did have a facebook account and [god help me!] a myspazz one too, for about three months a year or so ago. fortunately i soon got sick of logging in to find that friends and acquaintences i had previously thought intelligent people seemed to have regressed to primary school level and wanted me to buy them virtual pints, wrestle with their virtual zombies or send them vurtual hugs. so in a 'road to damascus' moment, i cancelled my accounts and havenae looked back since.
i sincerely hope that facebook, myspazz et al do go tits-up as soon as possible. their very existence embarrasses me in the way that - as a teenager - every subsequent chance encounter with some ugly girl i'd drunkenly shagged after a teenage party would reduce me to crimson embarrassment and my mates to elbow nudging hysteria.
OK - i had that facebook once. but i was really pissed at the time and it willnae happen again. can we just forget about it now?
Open, p2p & distributed
Social Networking and services like photo sharing should not be built around a closed client server model - the true nature of the cloud is distributed and decentralised.
Open protocols are required for profile, photo and event exchange with anyone able to build and distrubute clients that implement the protocols.
Most users have 200gb plus of storage and a broadband connection sufficient for sharing birthday greetings, photos and so on with their friends.
Getting the users to host the content they generate is the most cost effective way for these networks to work.
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