What an amazing feat, or does Bernie Madoff have a new line of work as how does a start up leapfrog the world of the giants to become the “super giant” if you will. As in today’s world, the billionaire is what was the millionaire in yesterdays, so where does this leave us at 100 billion?
In years past the equity valuation of a business was based upon the expected potential of return to its shareholders as my point isn’t to dive into PE ratios and the rote economic drivers. However just taking a logical look at how does one drive 100 billion of value out of a company which produces no hard product or contracted service. As in many other services where there is a form of “something” which bonds the users with the company.
However here the option is here today on “Friendster” tomorrow as the only thing which draws people is other people and for those old enough to remember the hoola hoop, we all had one for about a week. However it wasn’t a “compelling” product”, so where does Facebook sit in the compelling list? As there are a dozen or so options (companies) from which people are able to pick from which all do the same thing.
So in away, Facebook appears to be akin to the pet rock as everyone for about 10 minutes loved the concept before the realization set in that at the end of the day it still was only a rock. Here its clear Facebook may provide more value than a “pet rock” however there still is a strong analogy here as a rock does basically the same thing any other rock does. So one can say what does Facebook do that others providers don’t or can’t in the online social space?
So as with MySpace, Friendster, Beboo and so on before the Harvard startup darling hit the scene, what is to prevent the herd mentality from leading a mass exodus of biblical proportions to the next big thing? As right now their business model if you can call it that is the same as everyone else too in selling ad impressions, so the more screens the better!
As waxed prior, like with the Dunbar number, there is a practical limit to the number of effective impressions a person can process in a day before they turn to noise. So with existing giants such as Google and Microsoft (yes they do more than windows) also fighting for the eyes of the public, how will Facebook be any different? In fact if we look at the other two, they also have other business lines covering products and services, however what does Facebook have?
This is where my consternation comes from, or maybe better put, fear as 100 billion pours into the pockets of the very few, I have to wonder aloud if the emperor in this case really has any clothes…