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A few days ago there was a lot of chatter over Business Week story that Facebook was on the block, as long as the buyer was ready to pony up $2 billion. I suggested that the founders of the company should have been prudent and taken […]

A few days ago there was a lot of chatter over Business Week story that Facebook was on the block, as long as the buyer was ready to pony up $2 billion.

I suggested that the founders of the company should have been prudent and taken the rumored $750 million offer. My argument was that since their traffic was starting to dip, why not follow the philosophy – a bird in hand is worth two in the bush. It was no reflection of the possibilities of the network, or how much money the network could make in the future. Hell if I didn’t think they had a good thing going, I would have never written about them in the first place.

It was just looking at the Alexa traffic rankings. Michael Arrington and Matt Marshall, both took issue with me for using the Alexa Stats, because they thought Alexa stats were unreliable. Fair point, though I see people quote Alexa stats all the time. Nevertheless, I thought, well since they are arguing against the Alexa data, why not use a more reliable data, such as Comscore/Media Metrix. After all that was the information used by Business Week. (Matt should have also linked to this comment in order to complete the picture, but never mind.)


So what did the Comscore/MediaMetrix data reveal? From December 2005 to February 2005, MySpace added 5 million unique visitors while, Facebook’s unique visitors declines by about 2 million – or about 16%. And this is before spring break or March Madness. Ironically the data dovetails with the trends on Alexa as well. And given that I am lowly journalist with little check-cutting experience, the $2 billion price tag seemed crazy to man known to cut big checks.

Ross Levinsohn, the bought MySpace for News Corp told a gathering of investment bankers in NY: “We’re certainly not paying $2 billion for Facebook. If the price was right I’d be interested in it. It’s a great site and I know the guys there well.” Anyway Paul Kedrosky says it well, when he so pithily writes, “If paying four times as much for a smaller, slower-growing site whose main users leave in lock-step graduating cohorts every year isn’t mad, then I have no idea any more what is.” Meanwhile, I have heard from the sources, what Business Logs, had reported earlier his week: Facebook in a month or so will open its network to non-college students, and Linked-In type features.

  1. As an (outgoing) college student, it might help to shed a little insight — and ramblings — here on things Facebook does already and its value.

    First, Facebook already is open to non-college students. It opened a high school version of Facebook a few months ago. Apparently, it’s fairly popular (though, of course, not as popular as MySpace).

    They also now provide ways for graduating students to stay on and connect with others. They call this “Geography” and “Network.” Basically, instead of being associated and grouped by school, you end up being also associated by Geography (where you live). This allows you to connect with others close to where you live. It’s a pretty light feature, as it stands now, but I expect it to become more fully-rounded with some time.

    Personally, I don’t think Facebook is worth $2b at its current state. But, I think it’s worth a lot. I think Jason Calacanis is right when he talks about traditional advertising not working for social networks — I’ve pretty much never once clicked or looked at an ad on Facebook. You fairly quickly train yourself to know where they are and not click on them. But, I think, the potential for other opportunities — “creative advertising” — is pretty large. They certainly have a huge amount of market research which would be valuable to scores of large companies. They already compile this info into what they call the “Pulse.” The Pulse is a page on Facebook where you can see (overall or broken down by school) where you can see the most popular Music, Books, TV shows, Clubs, Hometowns, etc. You can also track them through time.

    I’d also love to see Facebook really attempt to change the archaic college job hunting task. Incorporate a couple LinkedIn features, but also find new ways of using all that data to help students move to the next era in their life.

    I think it’s worth noting that although the ratings say Facebook is falling, at least here at UChicago, it’s not. We were one of the first 15 schools to be added, and its popularity hasn’t declined. There maybe less people addicted to it now, but that’s a good thing, I think. Whereas many students used to spend hours just browsing page after page after page, now a lot of them are using it as a legitimate tool (“who else is in this class?”, “what is john’s phone number?”, etc) rather than a time waster. I think it’s also worth noting that when it was last reported on the Facebook homepage, they said that Facebook Photos (where you can upload and tag photos) receives over 1.5 million new photos per day. What’s Flickr at?

    Anyway, that’s all just me rambling from a college student’s perspective — something I haven’t really seen yet since this $2b valuation started.

    Ian

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  2. I once advertised for a client on Facebook, the response was very, very poor. I’m talking disastrous, and with poor follow-up from their salespeople. Myspace delivers far better click-throughs, even though those are low as well. However Facebook is a young, undeveloped business and there is no doubt they have many users that marketers would love to get ahold of. The question is how.

    As for marketing information provided by users, that will be tricky to do. I’m sure the exisiting purveyors of market research would like to get their hands on it, but that’s not going to be a major profit center, esp. if we’re talking about valuations higher then $500m

    Another problem– if they open the service up to anyone, does it lose its college-based appeal? Do students at the top 500 schools want MySpacers descending on their clean and unspoiled closed social network? Will a competitor that only focuses on major universities (for more exclusivity) be able to suck away their most highly-paid and presumably desirable users?

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  3. For the ads were they banners or facebook announcements? I was interested in advertising on Facebook, but if the results are poor then I won’t be.

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  4. “Meanwhile, I have heard from the sources, what Business Logs, had reported earlier his week: Facebook in a month or so will open its network to non-college students, and Linked-In type features.”

    If and when that happens, watch the college kids flee to the new services that are sure to pop up and be available exclusively to college kids. If college students wanted to mix it up with everyone, they’d be on MySpace.

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  5. “Another problem– if they open the service up to anyone, does it lose its college-based appeal? Do students at the top 500 schools want MySpacers descending on their clean and unspoiled closed social network? Will a competitor that only focuses on major universities (for more exclusivity) be able to suck away their most highly-paid and presumably desirable users?”

    Since it’s already open to high school students, I can safely say it doesn’t affect college students at all. They’ve always done a really good job of segregating users effectively. I still am contained within my school, with friends at other schools. I don’t see high school students and quite frankly, if they didn’t tell me they launched it, I wouldn’t have known.

    In my opinion, this segregation is a core reason Facebook succeeded in the beginning. They started only at Harvard, then slowly rolled out to a few more schools… Then the Ivy’s and NYU… Then a a few more schools, including UChicago… etc.

    But you never felt too overwhelmed with the new schools. Mainly because most of the features are constrained to a single school.

    If they follow the paths they took historically, I believe people won’t leave Facebook because of other types of users. (All else being equal, of course.)

    Ian

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  6. Michael, i tried “facebook annonucements” for selling stuff very relevent to that demographic (free ringtones etc) but the results are not good, even a third tier PPC engine deliver better results.

    Said all this i still believe Facebook can make a killing with some creative form of advertising for high end products relevent to college students (like say student loans)…

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  7. If Facebook tries to go the direction of LinkedIn then that would be a very bad move. LinkedIn hasn’t really caught on, not because it has bad technology, but because it has bad social dynamics. If Facebook tries to copy LinkedIn’s social dynamics then it will only weaken Facebook.

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  8. My 19 year old daughter who is in college tells me that Facebook “sucks”. Evidently you have to be invited in to join Facebook, or at least that was the case last time she visited their site.

    She’s taken me on a tour of several MySpace sites and they look pretty cool. I can see why MySpace is so popular.

    Facebook seems to have the hype pump set to high. Sounds like $20 million would be more in line with their true value.

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  9. I find it interesting that no one seems to be paying much attention to what Ian Sefferman has said (twice), which comes from someone a lot closer to the situation from a user’s standpoint than anyone else either in the comments or on many of the posts I’ve read — including Om’s. I think that’s worth at least as much as a lot of wanking about Alexa or comScore rankings, no offense. Not to say that Paul Kedrosky isn’t right, and not to say that $2-billion isn’t a ridiculous price. Just saying.

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  10. Mathew I am in agreement with you and Ian entirely. I think Ian makes all good points.

    I am just saying $2 billion seems silly, and dismissing Alexa data is not prudent. Hell, all i suggested these guys take 3/4 of a billion and go enjoy life, come back and do it again. there is no such thing as a sure thing.

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