Facebook _750 Mil in Hand Worth More than _2Bil in Sky

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Facebook _750 Mil in Hand Worth More than _2Bil in Sky Powered By Docstoc
					Facebook: $750 Mil
  in Hand Worth
More than $2Bil in
       Sky
     Brought to you by:

       Margaret Ortiz
     Affilorama Jetpack
It came up conversationally, but I believe I’m the only person at my company to have
firsthand experience as a user of Facebook.com. It was kind of funny to have all these
online advertising professionals asking me all about the website everybody used in
college. Didn’t they get the memo? I’m new. I should be asking the questions around
here. The subject of Facebook.com is an interesting one that’s worth a closer look.

Without question 2005 was the year of MySpace. Before Rupert Murdoch’s $580
million social networking venture took the interactive world by storm, it’s difficult to
believe that even the most optimistic of the billionaire’s lackeys would have predicted
that new acquisition would more than quadruple its reach within a matter of months.
With 23.5 billion page views by February, MySpace became the second most trafficked
site on the Internet.

Murdoch’s success naturally generated buying interest in anything deemed online social
networking. One proposed deal in March 2006, was Viacom’s unsuccessful $750 million
bid for Facebook.com, the phenomenon started by wunderkind Mark Zuckerberg. After
Facebook.com declined the offer, its founders pegged Facebook.com’s worth at two
billion dollars. Perhaps the brilliant sparks from MySpace’s success has blinded
Facebook.com to the flipside reality of Friendster’s paradise lost. There’s a real chance
Facebook won’t see an offer this generous again.

Facebook.com is essentially an online medium of communication for college students
and high schoolers. For its valued reach Zuckerberg and his crew of Harvard dropouts
(taking their cue from Bill Gates, no doubt) must be looking for Google-sized
compensation, but the two billion dollar figure is arbitrary and difficult to justify.
Perhaps Facebook is emboldened by their own wise decision in not selling to Yahoo for
$15 million in 2004.

Zuckerberg was likely trying to establish a market value for his creation, not an unwise
move on the face of things. However, Viacom’s offer was not by any stretch of the
imagination pocket change and the number of entities that can and will double the bid
Facebook already got is finite.

Facebook’s traffic numbers, as referenced on Alexa.com, during the last three months
are not encouraging; that is, if the goal is to fish for more and greater buyout bids. The
numbers actually have trended downward since March, anathema for enticing hyper
bidding growth. These diminishing statistics can be at least partially attributed to the
cyclical nature of the school year since Facebook, after all, is geared towards the college
student. It doesn’t matter how great the product is, it won’t keep students from doing
their own thing during summer vacation and this yearly dip is potentially damaging.

Seeing as how fast online fads can expand and contract in social networking as we’ve
seen in its short time span, what if the numbers don’t come back? What if something
new pops up in two months that steals Facebook’s thunder? (And, again, MySpace’s
success serves as good reason why this thunder is worth stealing.)

Facebook.com’s success has also been marred with some controversy that could taint
its popularity with students. At Syracuse University a flap over freedom of expression
ensued when a Facebook.com group went overboard in critiquing a student teacher
and ended up with expulsions from the class and social suspension before three
students transferred. After Penn State’s football team beat Ohio State this year
students rushed the field and made a ruckus. Overwhelmed police made only two
arrests that day, but later in the week they logged onto Facebook.com and, like
Canadian Mounties who always get their man, got plenty of names and faces and
photos from the info posted by students about their on-field shenanigans. Kids talk and
these stories spread like wildfire, which may affect Facebook.com negatively – they
can’t control misuse of their product and the negative repercussions that come from it.


The future is promising for the social networking business space and I don’t believe
Facebook.com is doomed. Still, given the nature of short-lived and over-hyped
dotcoms, Facebook may have reached their growth climax this school year, with
possibility for expansion and success only contingent on acquisition. Time may not be
on their side because as the pages of the calendar turn there will doubtlessly be new
fads and trends that will threaten to make something else the “Next Big Thing” at
Facebook.com’s expense. The clock is ticking.
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