Space Ramblings

What is the Value of Facebook Anyway?

With Facebook riding high now it might be time to remember Newscorp’s dubious MySpace buy at a time when MySpace was the ultimate social networking franchise. Today MySpace certainly isn’t gone, but it’s not looking nearly as good as it used to for the long term value context.

The problem is what do you really get when you buy something like Facebook or MySpace? The answer when stripped down to the core is basically a subscriber list, minus the part where subscribers actually pay any money. The AOL Time Warner merger was probably the most notorious case of a fortune being spent for what amounted to a long list of subscribers nationwide. The case is even worse with sites such as Facebook or MySpace because they have a built in sell by date.

Number portability was one of the big issues for cell phone providers. When cell phone number portability was enabled, cell phone companies lost much of the ability to lock in customers and instead had to depend on contracts and Early Termination Fees to do it for them. But there’s no ETF for social networking sites and the very evolving nature of the internet insures that the social networking site you were using a few years ago will soon be dated. And not in a good way.

No social networking site has the real ability to lock in its users because none of them provide a real service except access to other users. Like a nightclub where people go to meet other people, social networking sites have to stay on top of a trend or burn out and be taken over by the Russians or the Finns or the Argentinians. But staying on top of a trend is impossible, especially on line where trends have a half life of weeks or months.

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