It has been interesting to watch the social media sites as they began to grow and "catch fire" around the world. But, there is good evidence that the fire may mean that these incredible growth rates are over, and that they may either go up in smoke, or down in flames. Consider the slow demise of MySpace, and the constant grumblings of the current members of Facebook. Whether it is about privacy, advertising, or the problems one encounters trying to leave Facebook, the drums are sounding. And the problems are just beginning as Facebook has gone public, and making money becomes the primary goal. The market is saturated with FB, MySpace, Twitter, Google+, and other smaller social media locations. But, lets look at FB, and make some observations about the long term viability of this particular site.
First, it was inevitable that FB had to go public. There is an arcane law in the SEC's (Security and Exchange Commission) from 1964 that forces any company with more than 500 "shareholders of record" to open its books for examination. FB has had more than 500 for some time but had to, at some point, go public and share its financial details. But the fact that they went public, and the loss of GM as an advertiser are not the reasons for a less than bright future. But, with shareholders who will push for profit over everything, the pressure will increase on FB. Many sites, including the major newspapers,have struggled to find a model to monetize their content. But, there is an even more disturbing problem that leads me to believe that the heat is on.
If we go back to the mid-1990's until 2001, we may recall the dot com bubble that caused the failure of many online sites. The problem? They were all over valued and the investment bubble burst when the value of these companies was strictly on paper. And, that is exactly where FB is in terms of value. The widely quoted worth is over 100 billion dollars! Really? Then we would have to ask why FB and others have always looked for money to operate? There are still a lot of unanswered questions and I would not pretend to know where it will all shake out. But, the ill wind is blowing.
I realize that there are faithful fans of FB who live for friends and virtual friends, and those who consider social media sites a waste of precious time. But like virtual friends, there is virtual financial worth, and the time will come when the real value will be determined.
First, it was inevitable that FB had to go public. There is an arcane law in the SEC's (Security and Exchange Commission) from 1964 that forces any company with more than 500 "shareholders of record" to open its books for examination. FB has had more than 500 for some time but had to, at some point, go public and share its financial details. But the fact that they went public, and the loss of GM as an advertiser are not the reasons for a less than bright future. But, with shareholders who will push for profit over everything, the pressure will increase on FB. Many sites, including the major newspapers,have struggled to find a model to monetize their content. But, there is an even more disturbing problem that leads me to believe that the heat is on.
If we go back to the mid-1990's until 2001, we may recall the dot com bubble that caused the failure of many online sites. The problem? They were all over valued and the investment bubble burst when the value of these companies was strictly on paper. And, that is exactly where FB is in terms of value. The widely quoted worth is over 100 billion dollars! Really? Then we would have to ask why FB and others have always looked for money to operate? There are still a lot of unanswered questions and I would not pretend to know where it will all shake out. But, the ill wind is blowing.
I realize that there are faithful fans of FB who live for friends and virtual friends, and those who consider social media sites a waste of precious time. But like virtual friends, there is virtual financial worth, and the time will come when the real value will be determined.
RSS Feed
