I detest Facebook. If I were in high school, I’m sure I’d be all over it as a means of bullying other kids and hollerin’ at chicks (just kidding, love you Honey)…but as an adult? Really?
I don’t disparage the novelty of it, but c’mon. Life is supposed to be lived in forward gear, not reverse. This whole business of connecting with the people you lost touch with may seem fun now, but then you begin to realize why you lost touch with these people in the first place as they slowly creep their way back into your sphere.
Not for me. Anyway, what was I talking about? Oh yeah…get a load of this bombshell from News Corp‘s latest earnings report (NYT):
Global media company News Corp. said Wednesday its fourth-quarter net loss hit $203 million because of impairment charges at MySpace.
The net loss of 8 cents per share compares with a net profit of $1.1 billion, or 43 cents per share, in the same quarter a year ago. The results included $680 million in impairment and operating charges, mainly at Fox Interactive Media, which houses MySpace.
MySpace seriously sucks these days, huh?
It sucks like that daytime version of Who Wants to be a Millionaire. It sucks like the band Fallout Boy or like having to read a 6 months out-of-date, dog-eared copy of Esquire in the dentist’s waiting room (what the hell is the point of Esquire, anyway?).
Facebook’s been raising billions lately, and clearly, MySpace’s loss has been their gain. My view is that those looking to invest in Facebook at these valuations should heed the warning of what’s happened to MySpace in such a short period of time. MySpace’s loss of users, cache, and money should give the Russians and whoever else wants in pause. This thing peaked fast and peaked hard. Now it’s mainly goth kids and gangbangers on there, not exactly a desired demo for advertisers.
I’ve been questioning that $10 billion or so valuation on Facebook in light of the fact that it didn’t seem like it took much for Facebook to unseat MySpace. Where’s the moat? And don’t tell me the moat is scale and that everyone’s on Facebook, because that’s the exact same argument you could’ve made about MySpace circa 2006.
And here’s another dirty little secret you should know about Facebook: Advertisements don’t convert on social networks. That’s right, people don’t click ’em and they don’t fill out forms. When someone is on a social network, consumption is the furthest thing from their minds. Plus, they don’t even notice the ads on their own page, which is where many spend the bulk of their time (we’re all narcissists after all).
My affiliate ad friends on the Left Coast were telling me about this phenomenon years ago. They’d have to explain to advertisers who were eager for MySpace placement for the cool factor that the ads weren’t going to convert.
And if advertising isn’t the business model, what is? If Facebook started charging, even a nominal fee to aclimate people to it, I bet more than a third of users would just let their accounts lapse.
One other detriment to the Facebook/ MySpace story I noticed yesterday is that the kids may be starting to get too cool for large social networks. Research Reloaded noticed some teenage drop-off from the big sites recently as their parents have been logging on. Imagine being sixteen and having your Aunt Zooey poking at you online. I’d close my account the next day.
I suppose the pastiche of investors who are coming into Facebook with 10 figure checks will have to learn the hard way.