There has been only one topic in social media circles over the last few working days – my new book came out, “This Is Social Commerce”, thanks for asking. For some reason, though, people seem to want to talk about the Facebook flotation plan instead. The question many people are asking – including the BBC asking me on the News Channel on Wednesday a few hours after the official confirmation came through – was “is it really worth all that money”?
This is actually the wrong question, and I say that for a number of reasons.
First, Stock Exchange and Wall Street share values are a load of baloney anyway. If the financial crash has taught us only one thing, that should be it. A load of suits gambling not on what a company is doing right now but on what they think it’ll manage in future is no indication of real value.
The question, to my mind at least, is: where does Facebook go from here? This can actually be quite a complex query and depending on the decisions it takes it could fall flat on its face. There are lessons it can learn from similar companies.
So far, Facebook has proved one thing: it is extraordinarily good at sticking to its strengths and knowing what it can do. It is a brilliant social network. It enables people to contact each other, exchange ideas and so on – you know that.
In much the same way, when it floated in 2004, Google was extremely good at search engine technology. It was unbelievably good at it, and its valuation reflected that. Later, though, Google tried diversifying. It was hugely successful in mobile phones – Android has done very well indeed – but maybe less good as branding the phones as if they were its own hardware. The Nexus phones are nice but they haven’t performed brilliantly in the market.
Then it tried social networking. Once with Buzz, which didn’t do well. Then with Google+, for which it claims great numbers of sign-ups but it doesn’t disclose active users as Facebook does – in other words anyone who signs up, looks around and then never signs on again is counted in its huge totals. Facebook always quotes actual users.
Google also tried a collaborative working environment, called Wave. Nobody waved back and this was scrapped.
The point is that although Google remains very strong and I don’t underestimate it, it’s flip-flopped a bit. It once looked unstoppable and could do anything. It now looks as though it’s finding its limitations.
The new guys
So, what about Facebook? This could be a similar tipping point to Google in 2004. It has around 800m regular users, which is staggering and allows it to make a lot of money through advertising. But can it grow for much longer? Every instinct I have says it has to reach saturation point sometime soon. That said, I’ve thought that a few times over the last few years and it’s carried on.
Nonetheless, let’s say FB will reach natural saturation point soon. It then has to look at other ways of making money because lucrative though advertising will be, Wall Street will want growth rather than steady profit.
It’s not quite a week since the company announced that you can now buy items on its pages through a link with Maplin’s. This is the latest in a series of Facebook commerce pages – known as “F-Commerce” – which will keep people coming back to the site. You can book a windscreen repair through Autoglass using its Facebook page. You can apply for jobs. These are all areas into which the company has dipped its corporate toe and into which it no doubt hopes to grow – getting its members to operate their lives increasingly through its pages for their convenience and its own profit.
This may sound a bit familiar, though. High profile flotation followed by diversification into areas in which it may or may not be successful? That’s Google all over again, isn’t it?
I’m not saying Google isn’t still an absolute phenomenon. It is. I’m also not suggesting Facebook can’t make a success of any diversifications it goes through – it may well do. But I don’t take it for granted that a social network will become a retailer to compete with Amazon any more than I took it that a search genius like Google could become a social network to rival Facebook. And neither should any prospective shareholders.
Facebook has done amazingly well sticking to its core business. Many smaller concerns do the same and would rather not stretch themselves into new areas, with good reason. I wonder whether this will prove to be enough for Wall Street?