Big news recently was that Facebook is prepping an IPO (Initial Public Offering) of stock. Numbers being bandied about are 100 Billion dollars. This directly implies that someone somewhere believes Facebook to be worth this. Facebook has recently reached the 700 million account mark and growth in many nations is still on the rise.
Yet in Canada and the US Facebook join ups and use have hit a plateau and many suspect a decline in use is eminent. This could spell disaster for a massive IPO. Considering that Facebook does not earn 10% of the net income Google does, the actual value of Facebook even allowing for potential good will should probably put it at something closer to 30 billion dollars.
An interesting dynamic has come to light. It appears that when Facebook users reach a level of 50% in any given country or locale the attrition rate is equal or more than the sign up rate. In other words, the thing gets smaller. Every over inflated balloon eventually comes across a pin. Will Facebook explode leaving a 100 billion dollar financial sector heartbreak? Probably not. The folks at Facebook are masters of keeping their hype level ripe. As this is being written they have closed a deal with the Rockmelt browser that could have major Social Network development implications. Browsers are the key to all online ad revenues. Suggested preferences in the form of “Likes” are not near as definitive a marketing statement as a log of websites one has traveled to. Anticipating user needs leads to big click through rates, which in turn equals ad revenues.
Still all information technology companies must at some point adjust to change in their popularity. Ebay had to settle in as a simple online marketplace, AOL became a mere mortal web portal, and Yahoo is perpetually reinventing. Even Facebook will someday be passé.