Face Reality, Facebook
September 28th, 2006 | Categories: acquisitions, social media, strategyMuch like YouTube, Facebook is facing a similar predicament - but based on different circumstances. Facebook should sell now before it’s too late. It even has an offer on the table. Come on Zuckerberg, wake up and smell the acquisition…
Facebook’s meteoric rise to fame has come to fruition not because of exceptional technology but because 
of its choice of target audience: university and college students. The exclusivity of the social network is what sets it apart from other potential competitors (i.e. MySpace, Friendster, hi5). This barrier to entry weeds out many teeny-boppers, spammers, corporate marketers, and illegitimate users. This is the very reason that the network is highly valued. The university crowd is the holy grail for marketers.
Ok. So what?
Now Facebook is opening up it’s network to high schools and corporations (coverage from TechCrunch). To me, this is probably the most ridiculous/sell-out/screw-over corporate move I’ve ever seen. Kiss your competitive advantage goodbye. This undermines the value and credibility of the network and severely compromises the company valuation.
Just like in a stock market crash: sell, sell, sell. Cut your losses and run. With every new press release from Facebook, the company seems to keep damaging its reputation and further pummeling itself into a hole.
Oh, did I mention the privacy issues Facebook was dealing with at the start of September in which it had to roll back some site changes as a backlash and anti-Facebook sentiment began to sprout? See Mashable article.
Also… university/college social networks are starting to pop up all over the world, providing a challenge to Facebook going forward. These niche, regional sites are slicing away at market share and may very well slay the dragon in the process.
So I say… Mark Zuckerberg… you’re 22, or whatever… and you could potentially make a couple hundred million from an acquisition. Just do it (apologies to Nike for trademark infringement). Sell the damn thing. You’ve had a nice run-up. It’s time to say, “Hey, I’ve done well and I’m going to move on”… Yahoo is offering a hefty sum and it would be unjustifiable to pass up the opportunity.
Oh ya, did I mention Mark’s arch nemesis from Harvard is starting his own social network…
September 29th, 2006 at 8:39 am
I think you may be telling Facebook’s technology a bit short. Having used a few of these sites, including Orkut and MySpace, and now Facebook starting this week when they opened up registrations to a larger audience, I have to say that it’s a much more sophisticated system with elegant implementations of groups, photo tagging, updates, profile interviews, etc.
Selling now may be smart because the audience is a finicky one that could grow tired of this type of site overnight. I think that’s a better motivation for selling than the expectation that someone will be able to out Facebook Facebook.
September 29th, 2006 at 12:29 pm
Ed,
I definitely agree that Facebook does have a much more sophisticated system with elegant implementations, but this is not their competitive advantage and key value proposition to potential acquiring companies.
The exclusivity they bring forth through a “must have a university/college e-mail to join” eliminates many illegitimate users who are forced to suffice with say, Friendster or MySpace. In other words, the value of the network and audience is what sets Facebook apart.