Docstoc

Why_Facebook_Is_Worth_Over__10_Billion

Document Sample
Why_Facebook_Is_Worth_Over__10_Billion Powered By Docstoc
					Title:
Why Facebook Is Worth Over $10 Billion

Word Count:
1604

Summary:
Yahoo! have been in talks with Facebook for over a year now and
apparently recently got shy at Facebook’s $1 billion asking price but as
I will explain here Yahoo! have missed out on an absolute bargain.

Facebook have 18 million users, plenty. However MySpace has 100 million +
and sold for a mere $580 million to News Corp’s in 2005. YouTube sold to
Google for a reported $1.65 billion in 2006 but it serves over 100
million video’s a day and has over 25 million visitors a mo...


Keywords:
search marketing, facebook, online advertising,


Article Body:
Yahoo! have been in talks with Facebook for over a year now and
apparently recently got shy at Facebook’s $1 billion asking price but as
I will explain here Yahoo! have missed out on an absolute bargain.

Facebook have 18 million users, plenty. However MySpace has 100 million +
and sold for a mere $580 million to News Corp’s in 2005. YouTube sold to
Google for a reported $1.65 billion in 2006 but it serves over 100
million video’s a day and has over 25 million visitors a month. So what
makes Facebook so valuable? It gets relatively huge traffic levels but
not on par with YouTube or MySpace. Despite now being available to anyone
it began life as an exclusive network for students (you needed an
educational email to register) and this is still its primary user group.

So where’s the money?

Currently Facebook displays conventional banner advertising on users’
homepages and selected pages through the site. Adverts are unobtrusive
and random in so much as they’re not targeted at any particular user-
they’re just served to the entire site on a random basis. Facebook are
doing ok out of this arrangement on the basis of the number of page
impressions they receive, although in reality they’re keeping advertising
at a minimum in order to build up the value of the site for its eventual
sale which will almost certainly happen in 2007/8. Smart guys!

The power of information

Register with Facebook and quickly you can find yourself giving away huge
volumes of valuable personal information. Think about it… Facebook know
your name, they know how old you are (actually your D.O.B which is
infinitely more valuable as I’ll go on to explain), they know if you’re
male or female, they know your hometown, your postcode if you choose to
give it away (although I doubt many users choose this), they know if
you’re single, in a relationship (and who with), married, divorced etc,
they know your sexual orientation. Ok so you can answer all these
questions as honestly, dishonestly or vaguely as you like but from what
I’ve seen people happily give accurate information about themselves as
it’s their friends and potential friends who are going to see it- and no
one else right?

But what else do Facebook know? Well they know where you went to school,
where you work, more sinisterly your religious and political views. From
this we can start to build up a pretty valuable market profile. As I’m
telling Facebook I may as well tell you I’m Male, 22 (born in August),
Straight, in a relationship, conservative, atheist from Brighton,
England. Went to school at Blatchington Mill Secondary, college at a
place called BHASVIC, University at Bournemouth. From this information we
can draw further assumptions- I live in Brighton and based on the
location of my schools catchment area we could pretty accurately map
places in Brighton I know about, visit, and live in (think Google maps
API). I’m a straight; conservative from a reasonably wealthy area in full
time employment therefore I’m probably white, middle class with a decent
disposable income.

So what else? Facebook know what you look like, they probably know what
you used to look like a few years ago as well. Probably most
significantly they know who your friends are, they know how you know
them, they know when you talk to them, what they look like and ultimately
they know exactly the same information about them as they know about you-
you’re interests, likes and dislikes and your friends tastes as well.

They know your email address, so they know if you use Hotmail, Yahoo!
Mail etc. They know your phone number so they could pretty easily work
out your phone provider. They have your IP address so they could work out
your ISP. They know where you’ve arrived at the site from so they know
what search engine you use (enter Yahoo! And Google to the bidding war),
what browser you’re on, they know if you’re visually impaired or have
learning disabilities from the settings on your browser.

Facebook know when I’m logging in and from where so they know the hours I
work, if I’m using the internet at work, the pages I leave Facebook to go
to or the pages I come from so they know what other sites I look at. I
can set my current status and tell Facebook exactly what I’m doing or
feeling right this second.

Ok so you get the picture by now, one last thing though, is your Facebook
password the same as your email account password, your internet and
telephone banking password, every other password you use in your daily
life (because until I wrote this post mine was!) how much more
information do you want to give away?

What’s the risk here?

Realistically it’s pretty slim. Facebook are a nice bunch of guys and a
great site, I love using it and despite knowing what I know about
information security and the like I choose to give away a big chunk of
the information I’ve talked about here.
Yahoo! And Facebook

So if Yahoo!, Google or god forbid Microsoft successfully purchase
Facebook (as I say I’m reasonably confident this will happen this year)
the Orwellian lucid dream proposed by this post becomes a perpetual
nightmare. Imagine a company who have made billions and dominated the
fastest growing market in the world by developing algorithms which crawl
hundreds of millions of pages of random information (the internet) and
categorize that information with the ultimate goal of matching it to
businesses and selling advertising.

The search algorithm let loose on Facebook

Imagine the search engines let loose on Facebook. An algorithm tuned to
pick out profile information (John, born 13.08.84). Map it to keywords in
personal interests i.e. football, Manchester United. Plot your location
on a map i.e. Brighton, England. Follow links to your closest friends
with similar interests i.e. Bob and Dave who live round the corner and
serve me an advert something like:

Happy birthday for next week John.

Did you know its Dave’s birthday the week after?

Why not book tickets for Brighton and Hove Albion vs. Manchester united
on 12.08.07

Click here to book now and get 3 tickets for the price of 2 (why not ask
bob to come along- he supports Brighton and you haven’t spoken in a
while).

Book today and we’ll give you a half price limo from your house to the
game with trashy-limo’s.com.

Now that’s powerful advertising and it’s just around the corner. If
Facebook has 25 million registered users by the time it’s sold, half of
whom visit every day that’s a minimum 12.5 million page impressions a
day. Serve the advert above at $1 a click (which is far less than its
worth based on the current AdWords CPC model) expect a click through rate
of up to 10% based on the precise nature of the advertising and that’s
$1.2 million minimum a day- almost $½ a billion a year. Grow that user
group to 50 million (realistic if Google or Yahoo! can tap into their
existing user database) and sell ad space on an affiliate basis say the
football tickets at $300 with a 10% affiliate kickback and a 10%
conversion rate =$3 per user x 25 million users =$75 million a day or
$2737500000 in year 1! OK lets not get carried away people aren’t going
to spend $300 every other day but the logics there and so the cash.

Will the audience except it?

Better quality advertising means less advertising- less websites rammed
with banners so you can’t find what you’re looking for, less popups, less
low quality products. This is the main driving force behind the success
of search marketing programs and profile based advertising is already in
place with Google’s personalized search returning more targeted AdWords
ads than previously possible. If it falls into the hands of Microsoft
then people may be more wary but with the image of Google or Yahoo! and
Facebook profile information is seen as soft information as the company
doesn’t sell you products directly and he service is free. It’s the way
the internet is going and I believe it’s where we’ll be in 5 years.

Identity theft

The point I’ve been making tediously through this post is that we should
be more careful about what information we give up and to whom. If the
internet was a county it would be Nazi Germany and Facebook would be the
Gestapo! Social utilities like Facebook are afforded the sort of
privileged information fascist governments the world over would and have
killed for. We moan about identity cards being introduced in the UK
(ironically there’s several Facebook groups dedicated to the cause) but
we happily give up personal details to a bunch of college geeks in the
states who are ultimately planning on selling our details to the highest
bidder (the value of any site is based on the volume, quality and amount
of information they have about their traffic- but best of luck to them)
possibly to the company who already control the majority of world
business systems through the windows platform.

This post is not meant to scare- it’s simply a recognition of the power
of new internet technologies, their possibly applications and to pose the
question- if your Facebook friends are your real friends shouldn’t they
know your birthday? Are Facebook really going to buy you a present?!

				
DOCUMENT INFO
Shared By:
Categories:
Tags: facebook, worth
Stats:
views:1
posted:6/17/2012
language:
pages:4