Feeds

Facebook IPO: Boom or bubble?

We look at the numbers - and what's missing...

Top 5 reasons to deploy VMware with Tegile

Waiting for an explosion of online advertising and manure

Facebook's commercial proposition largely depends on growth in online advertising, and using its knowledge of the habits and behaviour of users to exploit into this. More offline advertising money will be spent online, says Facebook, and this will grow. The S-1 says worldwide online advertising market "is projected to increase from $68 billion to $120 billion, representing 12 per cent and 16 per cent, respectively, of the worldwide advertising market".

Facebook naturally makes much of the fact that users have (on the whole) real names. Whether this translates into "real behaviour" is something nobody in advertising really wants to talk about. Likes are cheap, but transactions are expensive.

The other is from - and please ensure that you're sitting down before reading this - in-app purchases made in virtual currencies. Games operator Zynga, famous for Farmville, contributed 12 per cent of Facebook's revenues last year.

As Peggy Lee sang, "Is that all there is?" There's a paradox here, one between the attention people give Facebook and its commercial ability to exploit it.

Facebook's lack of ambition

As Alan Patrick, of multimedia consultancy Broadsight, points out in two very interesting posts, Facebook is starting from a low base. Facebook's average revenue per user (ARPU) today, he estimates, is between $2 and $5 - let's be generous and say five. Google's ARPU at IPO was around $20 and it hit $20. Facebook has set itself some ambitious targets, however: "A lot more things have to go right, for a long time, for Facebook," notes Patrick, for it to achieve these.

Facebook may be able to get there with web advertising, developing such wonderful gifts to humanity such as (ahem) "sponsored stories", and micro-payments for virtual manure. But the S-1 shows a lack of ambition that would disappoint even a medieval minstrel.

Even Blackadder devised a cunning plan of selling fake religious artefacts (and indulgences and pardons) - although the Greenies have cornered the market in the latter in recent years.

This is all very odd. The internet has proved itself to be a disruptive technology - drawing millions of people into a new channel for media for hours every day. We know people pay for media they value. Facebook is already in the business of distributing media. Distributors of media who command regular footfall get to dictate terms - look at what the supermarkets have done unto the music business. And for media, substitute all kinds of other transactional services.

So Facebook is a potentially a really significant platform. But Facebook doesn't want to talk about any of this - let alone exploit it. And it shows an astonishing lack of ambition.

Instead the S-1 is full of some real blather: "We also have posted the phrase 'this journey is 1 per cent finished' across many of our office walls to remind employees that we believe that we have only begun fulfilling our mission to make the world more open and connected."

It's almost as if Facebook has discovered lumps of coal for the first time, discovered that this new thing is highly combustible in a predictable way - and decided to set up in the snowman-dressing business. They're perfect for the eyes. ®

Bootnote

You can find the Facebook S-1 filing right here. As an interesting comparison, shopping channel QVC, which employees 2,000 people in Kirkby alone (Facebook 3,200 worldwide), turned over $2.2bn in 2010. It sells stuff.

Secure remote control for conventional and virtual desktops

More from The Register

next story
Ex-US Navy fighter pilot MIT prof: Drones beat humans - I should know
'Missy' Cummings on UAVs, smartcars and dying from boredom
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
The 'fun-nification' of computer education – good idea?
Compulsory code schools, luvvies love it, but what about Maths and Physics?
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.