April 24th 2007 Posted at Startups
Comments Off on Is Facebook the new Pointcast?
I was thinking about this post about how Mark Zuckerberg turned down the billion dollar buy for Facebook.com. The post seems to agree that turning down the billion dollars was the way to go. I disagree and I think not accepting the buyout was a bad move. Here are my seven reasons why
- Yahoo was making the offer.
Yahoo understands social networking as evidenced by their purchase of Mybloglog.com and other social networking sites. If Mark and his partners are truly interested in “I’m here to build something for the long term,” Zuckerberg says. “Anything else is a distraction.” Then you should think about putting the company on solid financial footing. Social networks are notoriously difficult to monetize and too much monetization and you begin to turn off the user base. Yahoo would have helped push Facebook into the corporate marketplace.
- Social networking is hot this week. Just like push was.
I realize it’s hard to remember folks but push was a big thing just than social networking. Lots of VC money flowed into the marketspace and people were thinking about going public. Pointcast even made a push in the corporate space just like Facebook did last year Hmmm Facebook didn’t get lot of up take with companies did it? Facebook isn’t going to be able to compete with Linkedin which is more professional and quite simply more suited to the workplace environment.
- Pointcast spurned a buyout offer too.
Pointcast and their financial backers thought that the 450 million dollar buyout offer from Rubert Murdoch was too little. Of course when you are constantly flush with VC cash, it seems like any offer is too low. Sometimes a buyout works to help spread your brand beyond the your starting environment.
- Speaking of brands.
Facebook is named for the book of the incoming frosh at a college.Traditionally these books were simply pictures and information on the incoming students. In other words the site is strongly focused on college and the college environment. No offense but the brand just screams college. Given that branding, it limits the market for facebook. It’s simply not professional and over time people will migrate to professional market. It’s like running your professional blog on your myspace account. You can do it but no one is going to take you seriously.
- The social networks at colleges are highly artificial.
Here’s a hint, college isn’t real life. The social networks and relationships there are much like green house plants. They flourish in the hot house environment of college (first time away from home for most people. A preponderance of freedom, alcohol and close living quarters). Once you leave the green house, many of those relationships won’t last. A few will last and those will be the strong ones. Hanging around with your college friends isn’t the same thing as hanging around with your professional business contacts. You won’t know what relationships are valuable in college until ten years after college.
- Today’s social network are highly valued because of the “perceived” lock in.
The argument is that because people have so many contacts at Facebook, they will be loathed to move them/reenter them. This is might be true for some but most people have multiple points of contact with their most important contacts. Not all contacts in your social network are of equal value. People you get together in Vegas once a year don’t have as much value as actual work contacts. Furthermore the net makes this contact information less necessary. I recently was contacted about my high school reunion. I then quickly googled many of my friends from high school. Finding their contact information was pretty quick and easy. This means social networks have less lock-in than many people suppose.
- It’s a liquidity event.
What’s the other liquidity event for Facebook? An IPO? The market hasn’t been receptive to recent dot com IPOs. I guess the street is still shy after the last dot com implosion. Those VC are going to want to see a return at some point.
I don’t think Facebook will share Pointcast’s fate since they have such a strong presence on colleges that they will be profitable eventually. Whether or not the VC will have the huge liquidity event that they want is another matter altogether. I predict a buy out of Facebook, and when adjusting for inflation and Yahoo’s stock price on their offer, it will be less than the Yahoo offer.
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