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Phase 3: Profit

mattmaroon.com

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Re: Phase 3: Profit

#61

Post by nostrademons »

mattmaroon wrote: post #31
neilc wrote: post #26

Earlier quoted context omitted.

Why does Facebook need to focus on "getting paid. Fast."? It's not like they have any difficulty getting funding. Obviously they need to figure out how to make money in the long run , but it's not like they're going to run out of cash any time soon.

They'll have difficulty getting funding at some point in the future without a down round, which nobody wants.

They're profitable, though. So if they wanted, they could avoid taking any more funding, ever, and just grow the company off retained earnings.

Re: Phase 3: Profit

#62

Post by pchristensen »

nostrademons wrote: post #61
mattmaroon wrote: post #31

Earlier quoted context omitted.

They'll have difficulty getting funding at some point in the future without a down round, which nobody wants.

They're profitable, though. So if they wanted, they could avoid taking any more funding, ever, and just grow the company off retained earnings.

Profitable, but nowhere near profitable enough to justify the enormous investment they've taken and their valuation.

Re: Phase 3: Profit

#63

Post by pchristensen »

okeumeni wrote: post #4

The difference between Facebook and Google is Technology, the value of goods is define by its availability/scarcity. There's nothing spectacular about Facebook technology, Fame alone is not enough to justify those billions if you don't think so let see when they go public.

I disagree. Google's value is in the quality of its results and the speed of search. Facebook's value is in 1) all the users (a social site sucks if your friends aren't there) and 2) it's brand (people know about it and trust it). Someone could buy equivalent technology but not the users or the brand. Remember Google Video vs YouTube?

(fwiw, I think Facebook is valuable but if they can't monetize it, then they're in trouble and it won't bode well for all the other social network sites out there either)

Re: Phase 3: Profit

#64

Post by nostrademons »

Harj wrote: post #57
staunch wrote: post #53

Earlier quoted context omitted.

I recall Zuckerberg admitting at SXSW they only valued it at that so that Microsoft could invest their cash and not suck up a big percentage of the company. That would mean not even Zuckerberg pretends its worth $15 billion. It seems a bit lame to repeat this valuation as if Zuckerberg is running around yelling "My company is worth $15 billion!" because he's definitely not doing that.

as if Zuckerberg is running around yelling "My company is worth $15 billion!" because he's definitely not doing that well current hires are getting their stock at that valuation so the net effect is the same

Confirmed or assumed? If this is true, it's a big point against FaceBook's continued success, because it means current employees are underwater until FaceBook's worth more than Ford. One of the big motivators for a startup employee is seeing those options you got for pennies suddenly being worth dollars; if those options won't be worth anything for the foreseeable future, there's little reason why good employees would choose to work at FaceBook instead of Yahoo or Adobe or any of the other mature tech companies.

Re: Phase 3: Profit

#65

Post by axod »

yariv wrote: post #41
run4yourlives wrote: post #2

The biggest problem with facebook, imo. All the lovers will come and razz Matt and this comment, but none of them will be able to provide any evidence that facebook is doing anything but spending capital.

I think that when Facebook introduces a transactions API to their platform to enable frictionless micro-transactions in apps it will start raking in a lot of money by taking a cut of each transaction. How successful it can be is pure speculation, of course.

That assumes someone actually makes an app which is worth using. Let alone paying for...

Re: Phase 3: Profit

#66

Post by boredguy8 »

boredguy8 wrote: post #47
Mistone wrote: post #8

Earlier quoted context omitted.

how about growing users?..hmm thats seems like a valuable way to spend your time if your a consumer web company.

What exactly are facebook users consuming? And volume is no substitute for probability if every "consumption" is at a loss. Sony can sell the PS3 at a loss because it makes money on the games and in the long run, wins. They can't sell the PS3 at a loss and sell the games at a loss, and make up for it with volume. That's what facebook seems to be attempting. And they're not even winning the volume game.

Should have read, "volume is no substitute for profitability".

Re: Phase 3: Profit

#67

Post by daniel-cussen »

aswanson wrote: post #24
alex_c wrote: post #15

Earlier quoted context omitted.

My suspicion is that Facebook will have to change how online advertising works, or die. Look at Compete data: average stay of 15 minutes * 350 million visits/month = 87.5 million hours / month in the US. That is coupled with decent demographic data and ability to target. How much would that much attention be worth in TV or newspaper advertising? A lot more than Facebook is currently getting, I suspect. If it can conv…

They can convince major brands to advertise there. The problem is, unlike traditional media ads, web based advertisers can quantify how much bang for their buck they are getting (click throughs, etc). Turns out that blanket, weakly-targeted advertising just doesn't perform that well, and companies get explicit feedback from these networks on just how bad the typical ad really is in terms of ROI.

True. Advertisers sometimes say half the money they spend on advertising is wasted, but they don't know which half that is. Internet spending might be smaller because advertisers can figure out which half of ad spending they are wasting.

Re: Phase 3: Profit

#68

Post by aswanson »

nostrademons wrote: post #60
aswanson wrote: post #58

Earlier quoted context omitted.

That was not the point being argued here. He stated that web ads cannot be measured any more efficiently than any other form of advertising, and I provided evidence on how they can. You're probably right about that being the only form of ad they can monetize, though. The question then becomes when do companies spend as much in that space as they do on tv, if ever?

That doesn't measure what brand advertising wants to measure, though. If one ad gets 16 clickthroughs that result in 4 transactions, that ad is inferior to one that gets 0 clickthroughs but results in 8 sales when customers actually go to the store. Brand advertising works because most consumers rely on a recognition heuristic when faced with the dozens of products in a store. They'll buy products they recognize, eve…

Right, that is how brand advertising works. But given the structure of the web, you can get an estimation of how effective it is by how users respond to it (clicks).

Put yourself in the position of an ad exec who has $n dollars to spend on his campaign and has to present to a superior how effective it was. If he has a web ad placement, the execs in charge of the money are going to immediately query him on what they got out of it (how much traffic they got from it). Adsense has spoiled companies into being far more demanding on number metrics on effectiveness. I can't think of 1 flash ad, branding or not, that does not have the option to click and learn more about the product. They are measuring the ad resonance, transaction driven or not.

The fact of the matter is, companies want a return on their web ads they can quantify. They measure using stuff like this: http://www.vizu.com/

When they don't get it, branded or not, they leave: http://mdurwin.wordpress.com/2007/07/25/corporations-leave-s...

Re: Phase 3: Profit

#69

Post by Harj »

nostrademons wrote: post #64
Harj wrote: post #57

Earlier quoted context omitted.

as if Zuckerberg is running around yelling "My company is worth $15 billion!" because he's definitely not doing that well current hires are getting their stock at that valuation so the net effect is the same

Confirmed or assumed? If this is true, it's a big point against FaceBook's continued success, because it means current employees are underwater until FaceBook's worth more than Ford. One of the big motivators for a startup employee is seeing those options you got for pennies suddenly being worth dollars; if those options won't be worth anything for the foreseeable future, there's little reason why good employees woul…

i know it for a fact

Re: Phase 3: Profit

#70

Post by jcromartie »

axod wrote: post #65
yariv wrote: post #41

Earlier quoted context omitted.

I think that when Facebook introduces a transactions API to their platform to enable frictionless micro-transactions in apps it will start raking in a lot of money by taking a cut of each transaction. How successful it can be is pure speculation, of course.

That assumes someone actually makes an app which is worth using. Let alone paying for...

I can only guess that you're getting downvoted because there are people here who would rather not believe what you're saying because their startup is based on building Facebook apps.
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