Facebook Flop

The big news in the business world has been the IPO for Facebook. First there was the chatter on the price that the IPO would be released at. Then there was the loss in value in the following days. Overall, a lot of news has been surrounding the plunge Facebook took into the world of the publically traded company.

Was it really a failure?

It raised a lot of capital for the company. Isn't that what going public is supposed to do?

I think some people thought that this IPO would make them rich overnight. It's not impossible to believe that. It has happened on IPOs in the past. If you look at Facebook as an organization there are some upsides and some downsides.

A lot of people use Facebook. A lot of people use Facebook a lot. The current information says that 900 million users log in at least once a month. That's a lot of potential. I think the big question is what is this potential of? What really is Facebook. It's a social network. We all know that but, what is a social network?

Facebook acts as different things to different users. It's a photo-sharing site. It's a sounding board. It's a games platform. It's an internet portal. It's a tool to communicate. It's a place to react.

If you look at Facebook as an organization you have to cut through the clutter a bit to see what they provide. They don't produce content. They just give us a platform to share ours. They aren't the movie, they are the screen it's projected on. So, if you are only the screen and not the show, how much power do you have?

As an organization, Facebook doesn't have a lot of control of the overall experience of an individual user. Most of what influences the quality of a user's Facebook experience is the people they are connected to through the network. Yes Facebook controls how your content is organized but they have almost no influence on what the content is. That being said, people put up billions of dollars to own a part of the screen and none of the movie.

Facebook doesn't have any revenue from mobile access. At least not yet. Most of my access to Facebook is through my iPhone or iPad. I am not on it very often from a computer. For what I use Facebook for, this suits me just fine and there are no ads chewing up bandwidth or screen space. However, I would be concerned if I was an investor. I know a lot of people who primarily access Facebook through mobile devices and if they can't find a way to generate revenue as this user group grows, they could be in trouble.

Facebook is free to users. This is critical. Even though a $1 per month user fee for its 900 million users would result in $10.8 billion in revenue annually, it would never fly. Users would just leave and find a free service. Since Facebook is the platform and not the conversation, we don't want to pay for it. The users already "pay" in a way by providing all the content. Without user content, there is no need for the platform and the network will fail and Facebook knows this.

So, has Facebook reached its apex in revenue? I don't know. The average user doesn't know what they are cooking up in the back room but, if they can remain as a relevant platform to stay connected with people, they are going to continue to be there which is a lot better than a lot of companies who lose their way.