My Thoughts on Facebook as a Public Company

The past two weeks have been filled with opinions from experts on Facebook and its IPO.  I would say about 66% lean towards the negative side and say to avoid them at all costs.  Why?  Because GM pulled their ads.  Because a survey said 40% of their users will never click on an ad.  Because experts on TV, who don’t even understand the web, feel that they are overvalued.

I’m not an expert when it comes to stocks or IPOs.  I’m not going to write about P/E ratios, shares outstanding, or their market cap.  I am going to write about their product and its influence over the web.

Pages Per Visit & Reach

Facebook has roughly the same amount of pageviews as Google per day according to Alexa.  They are the 2nd most visited website on the web, just behind Google.

According to Alexa, Facebook is estimated to have 12.24 pages/visit .  For comparison, Reddit is listed as having 10.6 pages/visit.  So how accurate is this metric?  Reddit’s blog post from January shows 13.00 pages/visit.

This means that Alexa likely undervalues by almost 2.5 pages/visit and Facebook could be closer to 15 pages/visit.  As someone who runs a website and is a web developer, I assure you that 15 pages per visit is absolutely insanely good.  Their users are addicted and love Facebook. Few sites or companies can pull off these kind of metrics.

Social is a Fad

Many experts believe that social media is a fad and/or Facebook could easily be replaced.  I strongly disagree.  Remember when web portals were going to be a thing of the past?

Yes, its true that Facebook is not the first social website.  Friendster and MySpace came way before Facebook.  Unfortunately, their websites lacked innovation and sophistication that their user base was desperately craving.  Facebook forced the social platform to grow up and users graduated from MySpace/Friendster to Facebook.

Keep in mind that when you see commercials, Facebook and Twitter pages are often shown.  Facebook does not pay these companies for the advertising.  They are actually WILLING to showcase these two social networks because that is how important they are to advertising and reaching your customer base.

Today social websites are as important to the web as search engines.  Speaking of search engines…

Google

If Google has taught us anything, it’s that being the first to the market means nothing.  It’s about who innovates and pushes the platform to the next level.  Facebook did that with social and Google did that with search.  Altavista = Friendster.  Excite = MySpace.

The experts did not believe in Google when it IPO’d either:

To see a market capitalization valuing Google as a mature company is assuming a best-case scenario which isn’t a for-sure outcome. It still has a long way to go to justify growing into that kind of market value,” said Michael Cohen, director of research with Pacific American Securities.

Cohen added that in addition to Yahoo!, Google will face increased pressure from Microsoft, which has been stepping up its research and development efforts in its MSN Internet business.

Potential Growth

Does anyone realize how Google makes money?  They make most of their revenue from advertisements.  Guess what other companies makes most of their revenue from advertisements?  Facebook.  Some of my points here piggyback Venture Beat’s awesome article.

Charts here show revenue growth compared to similar IPOs.  Their opinion is that Year over Year growth is going down, not up.  This is obviously a bad sign, however the graph also indicates that Zynga’s growth year over year is better than Facebook.  It’s amazing what you can make a graph do.  That tells me absolutely nothing because Zynga would not exist without Facebook.  Meanwhile LinkedIn has perhaps 1/10th the amount of pageviews of Facebook.  So how much weight should we really put behind something like this?

The truth is that Facebook’s growth potential is insanely high.  They haven’t entered China and their mobile platform is still in its infancy.  Facebook realizes this and already is taking courses of action to correct this, namely by buying Instagram.

Their current revenue numbers could change drastically once they figure out mobile and their platform continues to mature.

Conclusion

What I wrote about here are taken from a web developer perspective.  I honestly don’t care about an investor’s expert opinion when he may have a hard time understanding the product.  He is looking at the revenue numbers and makes a judgement compared to the industry giants.  What he sees on paper simply doesn’t add up to the hype or the valuation.  That is completely understandable.  Software and the scope of the web is not a tangible thing that people can easily wrap their head around.

As I said, I am not a stock expert. I don’t dwell on P/E ratios or shares outstanding.  I don’t know what their stock is going to be at in 6 or 12 months, but I do know that Facebook, as a product, will be as popular as ever.  And that, by itself, has to be worth something on the open market.

 

 

My Thoughts on Facebook Instagram Backlash

Before I get to my specific opinion, let me voice my opinion of the two companies as separate entities.  Facebook, by itself is a fine service for the average Joe.  I personally don’t use Facebook because I think it’s a waste of my time. Instagram is similar to Facebook, and it pretty much invented the sharing photos game in the mobile space.  They are also popular for their over-the-top styling of photos that makes anyone think they have talent.

So in summary, both services are fine but not for me.  Clearly Facebook is lacking in the mobile department and Instagram is meant for mobile with no desktop penetration.  Sounds like a good fit to me?  Facebook’s mobile app might turn into something pretty awesome after this.  Instagram are going to have a lot more users in their grasp and probably have a vision where they want to take the company.  Being acquired by Facebook was an offer they could not refuse and it’s shocking to see some of these comments:

 

 

And finally:

One of my personal favorites is a story entitled: “Apple should have acquired Instagram” saying:

I would more likely wanted Apple to acquire Instagram. Apple actually needed Instagram much more than Facebook and Google. With a few Apple’s failed attempts to go social(remember Ping), that could actually worked. Instagram has 29M iPhone users. Most of them are very engaged with the application. The combination of Photo Stream + Instagram could be super powerful. I can see myself using it(a lot). Also, by purchasing Instagram Apple could have keept it iOS-only. That would be much appreciated by current iPhone users and for some people might be a reason to switch to iPhone.

Yes, that’s just what we need.  Apple to acquire Instagram, convert it to a pay only app. Charge $2.99 for the iPhone version and $9.99 for the iPad enhanced version. Perhaps throw in a subscription in there someplace for cloud syncing.  Not to mention keep it iOS only because that sounds pretty exclusive and cool.

My brain might explode. . .

As the web gets smarter, your privacy will continue to decrease over time

Here goes another rant, but this time about privacy.

Everyone worries about what is collected about them from big companies like Google, Apple, Amazon, and Facebook.  Back when I first started using the internet, it was a time where you NEVER used your last name for anything.  In fact, few even knew my first name (hello xpose).  The last thing I wanted was someone to know my full name, let alone anything else about me.

Well, times have changed.

Many people use social websites that you sign up for and intentionally post your thoughts, photos, job status, and other personal information.  You think nothing of this, as its the norm nowadays.  Yet you complain when Google bases advertisements or customized search results on your browsing habits.

So what?  What are you afraid of?  What’s the worst thing that can happen?  Are they amasing a database with the entire population in hopes to one day sell your data and steal your identity?  Hardly.  You’re not that important.

Zuckerberg was right when he said the age of privacy is over.

People care, but I don’t think they know why exactly.  I am not giving these companies a pass for collecting data and not telling its users.  What I am saying is that you shouldn’t be surprised.  If you want your information to remain private then stop using these sites. In-fact, unplug your ethernet cable and turn off your wireless.  You aren’t going to find many places to visit that respect your standards on privacy.

As the web gets smarter, your privacy will continue to decrease over time.

But something tells me you won’t.  You’d rather still use these services, complain about their irresponsibility, then check-in to foursquare.

The internet is our playground. We are its users.

Don’t look now, but the internet user has an increasing amount of influence over how or what is consumed online. Early on, only the geeks held some influence, but it is quickly moving towards the masses.

Geeks Force Legal Issues to Forefront

Roll the clock back to around 1997, way before the technological wonders of today’s world.  The mp3 was invented a few years earlier and the distribution of mp3s slowly began underground on places like IRC. (I’m sure elsewhere as well, but that was my primary method)  I never thought mp3s would ever make it to the average user, but boy was I wrong.  We didn’t know it at the time, but music would never be the same again.  At first the music industry was scared of something they did not understand.  Fast forward to today and mp3s outsell physical disc copies.

Also in the late 90s, the DVD was created to consume movies in a digital format.  Soon, a way to circumvent protection schemes on the DVDs, called DeCSS, was created.  Fair Use? Freedom of Speech?  The source code was printed on tvshirts and spread across the internet.  Geeks came in-defense of one of its authors and the internet was actively backing one of its own.

Fast forward a few years to the advent of HD-DVDs and the HD-DVD key fiasco on Digg.  I was a part of that, and we actually got Kevin Rose and Digg to change their stance and it felt pretty remarkable.  I thought this is about as big as it could get by having a voice online.  Boy was I wrong.

The Masses Get Involved

As the internet user base continued to grow, the average user became much more knowledgeable about the internet world around them.  Privacy started to become a key issue online and what is or is not appropriate.  Google had one of their first blunders when it came to Google Buzz and privacy.  Facebook too had their run in with privacy concerns (facebook beacon anyone?) again and again and forced some real change when the FTC got involved.

Average users also influence how websites evolve over time.  Twitter is a great example of this, as the hashtag was invented by one of its users.  Now we can see the hashtag across multiple websites and platforms that are incorporated in various ways.

Conclusion

Never before has an online following or action resulted in a pre-emptive strike against legislation until SOPA happened this month.  The blackout on Jan 18th was a great idea and major players across the internet were leading the charge.  Everyone should be proud of what was accomplished.  My prior examples have had their fair share of change and influence, but this is the first time I think that Congress has actually realized that we have power too.

Continue to be proactive.  Learn about the services you use online and the media you consume.  Learn about how the internet works and appreciate the work and sacrifice geeks did to transform the internet into what it is today.  In 25 years, don’t be surprised if high schools across America make the history of the internet mandatory curriculum.

The internet is our playground. We are its users.

(For more discussion, head over to hacker news)

5 reasons why the Internet Sales Tax Bill is bullshit

I just heard that there is a bill in the senate that will force all online retailers to pay sales tax, regardless if they operate in that state.  This is wrong for a few reasons:

  1. Online retailers are at a disadvantage to traditional stores because of shipping fees.  Local stores usually do not have to worry about these added fees during a purchase.
  2. Online retailers sell items tend to be cheaper than local stores.  Part of of the reasons might be that in order to compensate for the time it takes to receive your purchase, the buyer has to be enticed to save a few bucks in the process.  Otherwise, you might as well go to the store, right?
  3. Local stores play the game of increasing prices on personal items that consumers NEED to have.  For example, shaving blades.  You either don’t shave for 3 days, or you bite the bullet and buy it in the store even though it costs more.
  4. Local stores, such as Best Buy, mark-up prices for HDMI cables to $50+ dollars so uninformed consumers overpay for something that can be bought online for $5 dollars.  You expect me to feel sorry for local chains when they behave like this?  Then they offer extended warranties on TVs that are meaningless?  I don’t think so.
  5. And finally, the online sales tax “loophole” as some people have described it, is the ONLY loophole that us common folk can use.  Members of Congress and other big corporations use many tax loopholes so they end up paying less taxes or no taxes than people making $50,000.  These will never be closed because it benefits them.  I smell hypocracy.

    Before you start taxing all online retailers, you might want to look at forcing ALL companies that operate in the United States to pay corporate taxes.  Or should the 99% continue to be screwed over?