How Facebook could make some real money!
Everyone is talking about the Facebook IPO and how the numbers are not making sense and as it is on paper right now if you bought into the hype and bought the shares at 38 bucks a pop your going to be feeling some pain for some time to come. The company only makes $5 a user in revenue! Sure it has 900 million users but no one is paying any money to use Facebook and if it did it would likely have 890million inactive users making the entire site mute.
I've been looking into it and pretty much 15% of their revenue comes from one company Zanga which has game apps running on their platform. But you can get games from anywhere so why just go to Facebook. I've played the games found them annoyingly addictive and ultimately stopped playing once they asked me to fork over some real cash. Sure it's got advertising which I've even used to get people to this site but really the way it's modeled now and everyone pretty much moving to the mobile version I don't see much growth in the advertising space.
So if Facebook is only earning 4 billion in revenue the guys who paid 38 dollars a share by my estimates will take 125 years to get their money back and that's only if they paid out their dividend. With only 200 million dollars profit a quarter it doesn't look good.
Now the company is public still doesn't mean things will change either, since Mark owns the majority voting shares he still has the right to run the company the way he damn well pleases he may be a tech whiz with a great idea but after 10 years of Facebook and almost a billion users you'd think the company would be making more money than that huh. Clearly he's no Warren Buffet.
So without bashing Mark any further how is Facebook going to make more money, it's certainly not going to do it the way it currently is and since this is my field of expertise let me tell you how Facebook could make more money if it tried.
Start selling things!
The only way to make money online is to sell something, the only thing Facebook really has to sell now is games and honestly I'd rather be playing a Playstation then sitting there building farms on Facebook, the whole thing is a fad and people get bored. Facebook will soon have the whole planet on it so what it needs to do now is capitalize on all those visits and get them to buy something and get a commission. Think about how much revenue they could generate if they actually built out an Amazon or Ebay and integrated into Facebook, replace those crappy ads with links to products that you are actually interested in, if I wrote on my status that I wanted to go to Bangkok then put a damn affiliate link to hotels in Bangkok! If I'm not feeling well then show me an affiliate link to some online medical store that has just the right thing I need. If I said I wish i were rich then send me to some get quick rich scheme that some dube is going to buy!
Facebook has more users than any other site online except maybe Google and if they actually started selling things I'd go to Google even less! Thing is right now I can open up a page which I have done so for this site but if someone finds me through Facebook they come to my site buy my products and Facebook get's nothing! That's right nothing! If Facebook allowed me to promote my products and sell them through Facebook then they'd be getting a cut. If they allowed other people to do the same and gave me a commission then I'd be sending people again back to Facebook. That's exactly how Amazon makes it's money so why won't Facebook do the same!
Amazon will likely do 10 times the revenue that Facebook will this year but Facebook has the potential to do 10 times the revenue that Amazon does if it only started selling something. I always need a new gadget or computer but I don't need to play games or click on ads in Facebook. We'll see what they do in the end but honestly if they don't have a plan soon those $38 shares will soon be worth $4!
Your an idiot… first “your area of expertise?” Really? You were looking for a 5000 baht apartment in Pattaya! I don’t think you are in anyway an expert on this topic.
Now yes Facebook sold at 77.5 P/E and Morgan Stanley made probably 175 million US underwriting it. The price is ridiculous but lots of idiots bought it.
However you go on like your an expert, your not…. you can only live in a 5000 baht apartment, Monetizing a site the size of Facebook is not as easy as you think…. taking a cut from your sale of something… do you have any idea what the software, servers, currency converters, clearing banks, etc. would involve to do that? Ebay works well since it started to do just that and had to buy paypal to facilitate the money transfers, to adapt Facebook to do the same would be a nightmare.
Anyways I suggest you learn a little before you tell people how multinational companies should do business since you don’t know shit.
I am sure you don’t have the balls to post this so enjoy reading.
Again another fool who reads my blog and thinks they know me, any idea what I did for 10 years before I came to Thailand? Do I know what it takes software, servers etc ummm Yes I do actually that’s what I did in my past life for billion dollar companies before I came to Thailand!
Am I now living a more simply life where I don’t have to work by being more frugal yes does that make me an idiot to do this before I’m 30. Hardly!
No reason facebook couldn’t come up with a storefront app that talks to the current app. Though if facebook already is coming up with “crappy ads”, their current technology would probably send you to a crappy store. They should figure out how to generate good ads first and then see if facebook storefronts would enhance profitability and the facebook experience. It might not be necessary. Amazon asked if I wanted to share my last few purchases on facebook. It’s looking like the 2 giants are trying to figure out a way to compliment each other. facebook should also generate ads related to friends’ “check in” posts.
Right now I don’t pay for anything on facebook. What I would pay a small amount for is information on who is visiting my page and looking at various photos. I may have a seriously cute stalker without even realizing it!
“replace those crappy ads with links to products that you are actually interested in” – Well, that’s actually what they do.
Since now you have a Facebook page you will soon learn that it’s quite difficult to convert likes into buys so you will need a lot of them to earn any cash from Facebook. To do so you, in addition to an effective community management and social media strategy, you will need to buy ads and then you’ll realize 2 things.
1. There’s a lot of people claiming for attention
2. Facebook is actually rather protective about its users
Those two factors mean that it is rather difficult to convert. And Facebook would have the exact same problem if they were selling the product themselves. I guess that a lot of people would like Facebook to become more sympathetic to advertising (read add more ad space) but I also guess that Zuck actually kept control of the company in order to prevent just that.
So, the revenue now may be not a lot compared to the valuation but Google was not doing any better when they IPOed ($962m revenues for a $23b valuation for Google in 2004 vs $4.8b in revenues and a $70b valuation for Facebook) and they are in the same business, selling ad space. And, like Google did, FB is expanding its ad space outside of its own web space and this will hopefully bring more revenue without hurting the users.
And one last thing, the name is Zynga, not Zanga 🙂