Losing Their Cool?
Knowledge@Wharton reports on The Downside of Expanding Hot Social Networking Sites and focuses in on Facebook.
Facebook, a social networking site known as an online meeting place for college and high school students, is opening its doors to more people in an effort to grow beyond its current nine million registered users. Could such a move end up blurring the company's focus and diluting its brand? Are there better ways to expand?
I wrote about Facebook opening up here, and I'm starting to have serious doubts about their management team and strategy. It seems that for every report I read about a new (and often controversial) service they lauch, there is an article about them trying to sell the company. They're starting to look a bit desperate, to be honest. Believe me, I know the market is hot. But that's not a reason to ditch sound business practice and judgement for a quick payoff. It makes them look cheap in a red light district kind of way.
As I wrote here, their current (walled garden) business model is extremely organic and would continue to grow naturally as new students/freshmen join Facebook. The only reason why I can see them doing this (opening up) is to get big in a hurry in order to cash out - something that Facebook has not been shy about trying/announcing in the past.
Need more proof? Here's the latest from the WSJ, reporting that Facebook is in talks (again) with Yahoo! to sell the company for a reported cost of $1 billion. Here is a rather large snipped from the paid-only content:
Over the past year, social-networking site Facebook has held talks with Yahoo, Microsoft and Viacom over a possible takeover. Now, the start-up is again holding serious talks with Yahoo about selling for approximately $1 billion.
Ever since News Corp. scooped up MySpace parent Intermix for $650 million, the pursuit of the promise of sticky traffic and assessing the large numbers of users at social networks has become priority one for many large Internet companies. The social networks know that the Viacoms and Yahoos of the world won't be getting an established network for as cheap as News Corp. bought MySpace.
The danger of buying a social network is two-fold: One, the fickle nature of young users, who also happen to be the most coveted marketing demographic. What happens when MySpace is no longer cool? The other is the inability to control the content they create. Advertisers don't like that.
At the moment, the first problem isn't one for Facebook. Pursuers are chasing the social network with wallets wide open. But that doesn't necessarily mean that Facebook will sell. People close to the company say company executives have considered following Google's example, but that would appear to be unwise, as Facebook doesn't have a world-beating technology to embrace.
A $1 billion acquisition by Yahoo would be about half what the company was looking for in the past, according to previous reports. It's also unclear how a Yahoo acquisition would affect Facebook's recent ad partnership with MSN, a Yahoo rival -- although Facebook told Yahoo that the ad deal did not preclude further acquisition talks.
For more recent posts on Facebook see: Facebook Opens Up and Facebook's Mea Culpa.
Technorati Tags: social.networks, business.models, facebook
Thursday, September 21, 2006
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