Facebook has been pitching for a new round of funding these last few months to bridge itself to an IPO sometime in the future. We’ve known that since October, when (former) CFO Gideon Yu was in Dubai. In December CEO Mark Zuckerberg said the company was open to raising new money but only at the previous $15 billion valuation set by Microsoft.
But we’ve heard more recently that the company has been pitching hard for new cash at a much reduced valuation, hoping for at least $4 billion. And some investors are biting, but perhaps not at that price. A source with knowledge of the possible transaction tells us that General Atlantic may have submitted a term sheet at “around a $2 billion” valuation.
Will Facebook take the expensive new money from General Atlantic? They may be forced to. They’re burning as much as $20 million a month in cash and are dealing with ridiculous growth. They likely have less than two years runway left, and possibly significantly less if they continue to add new users by the tens of millions that are currently flocking there every month.
The cost of taking money at such a low valuation is higher than it appears. In addition to the direct dilution to stockholders from the new money, old investors at the $15 billion valuation may need to be made whole. Venture rounds traditionally include anti-dilution provisions that give investors more stock if the company raises new money at a lower valuation. Those anti-dilution provisions are heavily negotiated and can end up anywhere from full protection (which is very rare) to no protection at all (which is also very rare). It’s likely that there will be some form of additional dilution, possibly a lot of it, from the $375 million Facebook has raised at that valuation.
Update: In our original post we had said that both General Atlantic and Providence Equity Partners had submitted term sheets to Facebook. A new source indicates that the Providence information is incorrect, at least at this time, so we’ve removed them for now.
Wow what a down round!
Goes with the territory….VC’s are the last place MZ should be going.
If I were him I’d visit some well established Investment Banks…especially those overseas…
Oh and I’d reduce the headcount big-time and get some corporate sponsorships to cover the hardware costs. And the hosting costs, too.
Can someone find the link to the Techcrunch video (We didn’t start the fire) with those singers and the line from Peter Thiel “There is No Bubble in Technology”
Great strategy by Microsoft. Make a ridiculous investment in Facebook for fairly little money. Create havoc with the next Facebook round as evidenced by the CFO turnstile. Now Facebook gets beat with the uglystick.
It’s truly amazing how naive young entepreuners can be sometimes.
bingo!
oh yeah, that’s gonna hurt bad!!
Nice conspiracy theory by MS haters.
Completely agree. A few of us made that point at the time of Microsoft’s initial investment in FB.
Raising 250M at 2B is nowhere near as bad as the crazy round paypal had to do before their IPO
wall st and mom and pop investors would easily eat up a $10B facebook IPO – so raising 250 on 2000 now is well worth it.
No they wouldn’t. You don’t understand the market. Companies that don’t perform don’t get the time of day, no matter what their name is.
>wall st and mom and pop investors would easily eat up a $10B facebook IPO
You must be on crack.
Who on earth who give facebook a $10B IPO?
ebay is valued at $18B, and they actually make real profit – $1.8B last year.
In contrast, facebook has never made a single cent in profit in their entire existence and may never.
It’s been MORE THAN FIVE YEARS after facebook started and they still haven’t found a business model.
And you’re telling me “investors” will buy into a $10B facebook IPO?
Can you tell me who those “investors” are? I have a bunch of Lehman stocks to sell them at $200 per share…
Microsoft never valued Facebook at $15bn – it was a con of numbers:
http://weseethr...-valuation-con/
i guess all those mark is a billionaire articles went to the trash cans
Sounds like the Web 2.0 bubble is popping. First, StumbleUpon getting re-acquired by the founders.
Skype founders in talks to buy it back from eBay at a low valuation.
And now Facebook all of a sudden only being 1/7th of what it was a few months ago.
The hi5.com guys are looking pretty smart — bebo.com even smarter…
Does Facebook need the money that bad?
Why does Hi5 look smart? They have tons of users and no monetization strategy either.
hi5 sucks they have international users and most of them are in small consumer markets. so there is nearly zero advertising potential
How much do they need right now,,,how much are they trying to extend their runway? Any predictions?
MY guess is that skepticism in online advertising overall has played a large role in diminishing their internal and external valuation. Thus, it is only expected that the number should be less than normal. Furthermore, MSFT didn’t really care what the valuation was when they bought in. It was worth any money to form a strong bond with facebook early on.
They should ask Friendster what to do. HA Based on their attitude in the market, I am glad to see this.
2 billion for a giant cash oven like Facebook isn’t bad
cash oven? is that at 451 degrees Fahrenheit?
Is everyone’s memory seriously that tarnished?
When Facebook closed the Microsoft deal, it was more a case of Microsoft getting a search deal. Microsoft isn’t in the venture business; it’s making partnerships like how rival Google did with MySpace. The PR team at Facebook cleverly disguised this partnership as an “investment”, thereby trying to shift perception in the market that the company was worth $15 billion by this partnership deal phrased as equity – which was way above what most people thought it was at the time. It was ridiculous at the time, and it still is ridiculous for a company like that not generating matching revenue, to get a valuation like that.
At the time, I remember thinking how smart they were. Despite the ridicule at the time, I thought that if they kept the $15billion valuation line long enough, it would become a self-fulfilling prophesy. And guess what – it seems to have happened. Since then, the industry industry makes it as fact that Facebook was once valued at $15 billion.
Dig back into the archives of your minds, it was smoke back then and it still is. It’s stuff like this why we are in a recession now – because smart arses bullshit the market with false valuations, that are only going to bust eventually.
Facebook isn’t losing anything, they’re just played the market very well.
Elias, thank you for writing all that so I didn’t have to. If anything, it was a very savvy move on Microsoft’s account to get some equity (ANY equity). Google gave massive guarantees ($900m I believe) to Myspace for their ad rights and I doubt they got any equity out of the deal.
we tend to get overwhelmed by all the fuzzy numbers in vc tech. do you know the real value of powerset? was powerset the most expensive acquisition that will never see the light of day?
BuyLocator.com – everythings for sale
You might be right, but how you look at the Microsoft deal with Facebook might be just semantics. Microsoft gave X-amount to Facebook in return for X-amount of shares and the agreement for Microsoft search technology to be used. So the valuation of 15billion might be misinterpreted and could have been a clever PR phrase by the guys at Facebook, but if you think about it, Microsoft paid X-amount just to get its foot in the door as a partner. Disregard the financial crisis and imagine what someone else would have to pay if they have nothing to offer apart from money. Its just that money has become so rare now, that it is enough of a bargaining chip, and VCs can afford to under-value.
This has played well for Mircosoft. I wonder what percentage of shares they will get as part of this round of financing’s dilution to the previous round. If the 4billion valuation is correct..I’d like to see some number crunching to give us the MS’s share percentage in Facebook.
On the other hand, what has that inflated PR valuation really gotten them? No one has given them more money at that valuation, and their PR might all be cancelled with a new flood of stories if/when they take a new valuation WAY below 15million.
Actually you are wrong.
The $15B valuation wasn’t all “smoke”. It was real at one point.
Shortly after Microsoft made its investment, the Hong Kong billionaire Li Ka Shing also invested in facebook at the same $15B valuation. And that was a pure equity investment with no ad partnership attached.
So yes, the $15B was real at one point.
Therefore facebook did lose 87% of its valuation in a few months.
perhaps it’s over to free services on the internet. perhaps it’s not going to be a big deal anymore to have huge user base if your product is for free. think about that, if some local bakery would give away their bread for free, they would be soon the most popular in town but value of their business wouldn’t reflect number of “customers”.
Google got so lucky with AdSense that it actually worked. Without AdSense they would be in similar position like Facebook. I believe there is some massive oppurtunity to make lots of money for Facebook but who knows what it is. It’s clear they’re struggling to find out what it is themselves.
The plan has to be some ad plugin for publishers that could compete with adsense. It definitely could compete because adsense feeds ads based on content, and facebook could feed ads based on content and user information from facebook. Maybe I’m wrong, but I thought that was the whole point with facebook connect?
Yeah, let’s hope that EVERY website has ads as awesome as what you find on FB. That would be awful!
lol… according to facebook i desperately need to lose weight, have zits, need a bath, enjoy Oprah and have terrible credit.
Also…we need to remember that Google already had a model to copy/improve in their back pocket. Goto.com (overture,yahoo) had already proved a basic search advertising model in a big way.
Facebook has nothing like that to follow. They either need to invent something (which is going to be extremely difficult at best) – or plaster ugly ads (that will never get clicked) all over the place…or turn off the lights.
I am sure they could raise some capital through an IPO – but even joe schmoe investor wants to see a business model nowadays…joe and I still remember web 1.0.
Users first, revenue model second is not a sound plan…never has been and never will be.
the main reason people go to google is to SEARCH. the main reason to go to facebook is to meet friends. While it is obvious and simple that people SEARCHING for products may buy the one that came first (sponsored [payed]), I see no reason why a cheap student going to Facebook to chit-chat with friends may want to search for products and BUY something.
User lubos said it right — your company should not be valued out of how many customers you got, but again like its been since the begining of capitalism — whats your profit. However, if you look closely all those rich sharks that put money into companies like Facebook they have little to no – knowledge how internet works and how people spend time or their money over the network. So they key thing is to convienance them it is too early to say. And they like that. Thinking about uncertain future is better to know you make $100, because they cane hope and dream they will make $10,000 instead of 100. Oh well, happy dreaming!
You do have a point, but companies that depend on advertising based models are all about eyes, which is why Facebook’s value can be measured by its user base. I believe the value is there, they just need create a quality product that can compete with adsense and they will be in the money. Facebook is starting to get some quality advertisers, and I surely do believe if they were to add a publisher ad plugin, their ad feeds would certainly be more relevant than adsence.
Wow and skype sold to ebay for north of 2 billion just a few year ago. times change.
I am not surprised. Facebook was never worth 15 billion and for a website with only source of revenue being ad, 2 billion might just be correct.
I fear Facebook might just make history for being the first company to grow too much too quick to land in dead pool.
If a company is burning more money than they are making per month after this much time, their ‘valuation’ is zero or here’s one for you (negative valuation). Damn valley retards, self proclaimed social media experts, idea guys that can’t do shit but talk and VCs with their bloated valuations on web apps with no business model? Better yet, hey lets launch apps that work like shit like twitter with no biz model or rich user features, dead simple to develop with the only worry of growth and they can’t even validate user input correctly. WTF is this www coming to. Incompetent wanna bes, the valley is filled with them.
agree~
love the enthusiasm
the worst… have a business model and VCs look at strange; like it’s a sin to make money.
must be that your idea sucks and your business model is not realistic
yes, that must be. surely no good idea has ever been rejected by highly sophisticated VCs
Hey don’t hate the player hate the game. It’s how we can make a couple of million at such a young age. People should do the same if they want to make some money.
It does’nt help when twitter is on everyones lips, kind of takes the shine away from facebook and IPO’s are all about shine.
Facebook are to big for there own good, unless facebook, myspace, twitter, youtube, find away to monetise, they will find themselves on the verge of a ungratefull shift.
The first to monetise wins…
Neno – I bet you 100 bucks in 15 years from now you wont hear much of all, except maybe google.
By the time new kids came around and grew to be tenagers, those websites mentioned by you won’t be “cool” anymore.
Let me ask you (and I assume you are in your 20s or 30s) — what would you like to drive: sporty 400hp BMW, sporty 400hp Mercedes, or sporty 400hp Oldsmobile or sporty 400hp Cadillac?
I hope it is obvious what I am trying to say.
uh…reference to Nino Brown? Definitely 30+! That’s “New Jack City,” fool!
sorry I am new around here
100% right Dan, given the choice of car to drive I would have to opt for the Vintage Rolls Royce with a graffiti finish and yes I am over 30, well spotted techlegaleagle :0)
they missed their window of opportunity. Now, even $2 billion is too much for a loss generator and a service where people are leaving in masses (http://www.goog...delete+facebook).
Having deleted facebook recently I now clearly realize how little value there is in facebook.
It was a huge bubble that corrupted many people’s reasoning. Now we’re back to Earth.
I wouldn’t be surprised if it goes bust slowly but surely.
i think there is a lot of value in facebook, they are just worrying about their users too much.
An interesting graph until you control for growth:
http://www.goog...=all&sort=0
silicon valley vc’s have been shell gaming since the beginning of the internet. the transparency is probably greater now. their products are weak. their game is over.
I’ll be surprised if they don’t figure out a way to monetize their assets and control costs over time in some way, but I doubt FB is going to be anywhere near the cash cow that GOOG is…
…and given the current state of the IPO market (which is to say, there isn’t one and won’t be one for quite some time), it’s hard to envision the same type of wealth creation coming out of this entity…
These facebook haters are jealous of their success. Facebook is possibly worth $40 billion, and is no bubble. These web 2.0 valuations are wholly justified. http://iamned.com/blog/
Sure.
Now what is value? Well, a lot of things but in the market, it needs to be backed up by cash.
Is Facebook worth $40 billion? Well it needs to be generating enough cash to justify that. You can’t say something is worth something, if it can’t get a cash return on it. That’s when it’s a bubble valuation – when the expected valuation can’t be backed up by real value.
Companies can get away with higher valuations when their growth rate is expected to go crazy in the future, resulting in a higher terminal value. But it seems like people are using user growth, not revenue growth, as the metric for this.
If your a VC investing in facebook, you must have huge gonads or have inside information.
bidness is all numbers, red or black; u always want black.
+1 agreed:
When we launch our new product with the FB API plugged in, the $40 billion valuation will easily be surpassed.
Facebook haters, keep talking. More better when the shock of when the real powers of Facebook start to reveal themselves. FB has done their job at getting over 200 milli users, who says it has to be THEM that finds a way to monetize? They did the best thing ever by opening their industry leading API platform, all that’s needed now is for a 3rd party to bust this thing wide open.
FB API is so strong, they don’t even know the full capabilities of it, but they will really soon. I am so sure of this that FB API keys will likely be “licensed” really soon due to what we are about to do.
Stop hating on Facebook and use your development talents to monetize their 200 million users since so many people feel FB can’t do it themselves.
Facebook was the FIRST social network that said to you “ok, here, take advantage of our growth, here are millions of users you don’t need to get yourself, just bring your great ideas.”
You ungrateful cowards! Put your business development skills where your opinions are and show FB how to monetize FB.
We are.
If I understand you correctly, you’re saying that your Facebook app is going to justify the “$40b” valuation? Is that in theoretical dollars (see: Southpark) or in cash-money dollars?
Yes, and matter of fact, I will prove it shortly right here in this comment section.
cash-money dollars!
Hey, you said you were going to show us how Facebook was going to get a $40 billion valuation. I’m waiting.
William,
You are very similar to Ali G trying to sell the hover board from back to the future.
“You are very similar to Ali G trying to sell the hover board from back to the future.”
Hands down, the quote of the week.
how many months ago did they say that “ok, here, take advantage of our growth, here are millions of users you don’t need to get yourself, just bring your great ideas” — and please point me out to those “great ideas” that made their authors millioners and bring billions to FB
MuuVii is a patented commercial “streaming” video/audio format that is the successor to optical disc technology (DVD and Blu-ray).
When we release the final version of this technology in a month, content owners will be able to sell/rent full Blu-ray level titles, or sell pay-per-views for day1 in-home theatrical releases electronically (in full 2K cinema resolution).
As a successor to DRM, MuuVii will tie ownership rights to files with a buyer’s Facebook ID. The novelty here is simple. Users can carry their entire MuuVii library on a USB stick or USB hard drive, and play it on any PC or (future) hardware devices by simply logging into their Facebook account. Content owners get the protection they want and consumers get the use flexibility they want. Example how this works: You buy a new Blu-ray player, and to play MuuVii files using a USB stick connected to the player, you simply sign in to your Facebook account to authorize the player to accept the electronic media. There are a ton of details about this which I can not reveal now, but we believe we have the solution for audio/video entertainment of the future, today.
In clear terms, instead of restricting media to 1 computer using DRM, our media can be played anywhere by replacing DRM with Facebook Connect
Content owners get the protection they require for commercial content, and consumers have an easy way to move purchased and rented media to multiple machines with no access limits.
MuuVii can deliver a “virtual disc” using local and internet streaming, in this post I will give a “streaming only” demo of the format. The final release will allow “local streaming” which will be explained in more detail at that time
Note: You must have at least a 3MBPS broadband connection and a Windows XP, Vista or Windows 7 PC.
1) Please visit our site to get the preview version of the MuuVii app: http://bit.ly/bk7j
2) Here is a 1080P MuuVii demo, file size is only 3KB: http://bit.ly/HvAf
SCREENER MODE DEMO:
We use Facebook for our Screener Mode. Screener Mode only allows friends of the MuuVii author to access the program. This technology would have prevented the leak of X-Men Origins: Wolverine and other Hollywood films privy to pre-theatrical leaks of screeners and work-prints. Screener Mode places a light overlay of the FB user name over the video window and closes at the instant of a mouse click to prevent activation of screen capture software.
Mike Arrington can view this demo as he is in my Facebook friends list, anyone else that want to see how Screener Mode works, please do a search for my name on Facebook and contact me before trying this demo.
1080P Screener Mode demo: http://bit.ly/1ogrWR
KodeKey Password: 54321
How does this boost value of Facebook?
In 10 years when your sitting in your car and want to watch a movie or listen to an album, you will be able to plug in your USB stick with millions of MuuVii files on it and access purchased and pay-per-access content through your always-on 100MBPS wireless white-space connection. When your home ready to watch Batman vs Superman in 4K cinematic 3D on your wall flat 120′ OLED, the format delivering that will be MuuVii and your files will be tied to your ownership using your Facebook Id, which at that time I expect will be a major form of digital ID lol.
Device FB API licensing, video advertising that can drop in between MuuVii streaming programming (using an Adsense style business model), that allow consumers to have free content access (like todays TV commercials), we belive this is where the value of Facebook’s API will shine with our effort.
Would you place the future of video/audio entertainment at only $40 billion? Screener Mode alone will save the movie industry that much alone in the next 5 years.
Numbers:
MuuVii is compatible for commercial media deliver to over 1 billion PCs in use around the world today.
Built-in support for purchases and rentals using PayPal, 200 million account holders.
Media rights management by Facebook, over 200 million users.
In-store retail sales on flash media (USB sticks) and coded plastic retail cards replacing optical media.
The NBA could deliver every game Michael Jordan ever played in a 2MB zip file of MuuVii “streaming only” files, or a 1TB retail hard drive using the MuuVii local streaming feature. Would you pay $500 for every game MJ ever played? I would.
Now, as I asked before, instead of hating Facebook’s success, how are YOU planing to share (or exploit) it?
Regards.
William G. Blanchard
Inventor/Owner
The MuuVii Company
The Retail Zip Company
Kordor Electronics.
Please excuse grammar as I am posting this in transit.
Note: Facebook ID ownership is not requested in the first demo above.
The first demo is just an example of how the format works, in the final release, content sold using this format will tie ownership with FB.
Or, you can use the “pass-through” feature used in the first demo and employ your own DRM rules (such as content subscription)
Your service may be wonderful, but I hope it is not based on absurd assumptions like “paying $500 for every game MJ every played in.”
I might be interested in watching a handful of games for, say, 10 cents.
@ David,
Yes you will be able to do that to using the streaming pay-per-access model built into the format.
How can you get BluRay quality bit rates (35mbps) from a 3mbps connection?
This is essentially a cloud-computing method of content management. But in order for this to work, you would need a great deal of licensing situations with thousands of content makers, many who have their own issues with dividing media money ( remember the actors’ strike? )
Another reason why this would fail is because you would then have to compete against exclusive licensed vendors who have their own way of making money ( ITunes, Hulu ) who would hold off any contract that delivers away from its revenue.
Sure, you can drop NBC on this little thing, and they can create Muuviis. But in terms of content packaging ( ie: every game Michael Jordan has ever played ), how will you pick up the licensing from all the media outlets that have broadcasted his games? You would then have to hire a lawayre to speak with NBC, ABC, ESPN, TNT, along with the workers unions to create a licensing product since Michael Jordan’s games are not owned by one entity.
If you could get the NBA to package the games, then you would have to give a piece of the pie every time the package was bought. Believe me, you are not the first media aggregator that has tried to do this.
Your model precludes that once it gets going that every media company is going to drop to their knees and unzip your pants. But most companies, in any industry, are slow to jump to these measures. What is worse, is that they could easily replicate your model ( essentially storing content in a server and having a key through facebook stream it ) and make their own dealings with Facebook.
Your model and your idea isn’t new, but I do like the twist. At the same time, you need a David Tyree catch against the Patriots type play if you expect media contracts from thousands of competing companies to just drop in your lap.
At the same time, this is a function a lot of comapnies are thinking about, so if you can sneak this project in there, you might come off with something good.
In terms of Facebook’s 40 billion valuation, two things will occur:
1) Your API falls off the wayside
2) You API is replicated in a different architecture ( thereby losing your patent rights ) and Facebook re-organizes the model into their system.
3) Life goes on
I don’t mean to bash you, but your Facebook pom-pom tirade is a little overboard for a model that isn’t much more than licensing content. Even Apple’s Itunes contract has a low profit margin, and they OWN the ( legal and paid ) downloading music industry.
William,
David has already criticized this from the point of view of those who provide content. I’ll offer my criticism from the point of view of the potential user.
I love basketball. I wouldn’t pay $500 for every MJ game, though. I wouldn’t even pay $5. There are already torrent websites where I can download every single one of those games for free. While I’m at it, I can also download copies of classic games of other sports, from baseball to old FA Cup finals — all without paying a cent. If those torrent websites are made illegal and shut down, I’ll just enter the trading community, where I can deal the games I’ve already downloaded for games I want to see. Why should I pay you a cent for something I can get for free?
The same goes for new movies. Why should I pay a cent to stick in a USB drive and gain access to new movies through Facebook? I can find everything I want through torrents, and, if I don’t want to download the whole thing, http://www.tudou.com and http://www.youku.com usually have streaming copies of everything out there.
What you’ve got to learn is that the internet is not a paradise for advertisers and venture capitalists. It’s nothing more than a collection of communities, ones that are quite willing to share content with each other, whether legal or illegal. The internet is reminiscent of those who would trade live tapes of the Grateful Dead back in the 1970s: we pride ourselves on helping each other out for free, and we are skeptical of anybody who wants to sell us anything.
Facebook’s demise is imminent. The minute Facebook tries to get us to pay for anything we can do for free now, from uploading pictures and videos to using stupid applications and quizzes, is the minute we simply stop using it. Easy come, easy go.
Shoot, I meant Redsoxmaniac, not David. I wish there were an “edit” feature.
Dan, while you make some good points, the problem with your argument is that you’re NOT the typical internet user.
There are a couple hundred million internet users, how many of those visit torrent sites…how many would even know what the hell you’re talking about?
What I find drives persons to download pirated stuff off the net, as much as price(i.e-FREE) is convenience. I know a fair amount of folks that would not mind spending a “reasonable” fee to access the content they seek in as high a quality as their connection would permit.
It’s easy for us to sometimes think that everyone online has the FREE FREE FREE mindset going on, in most cases, that’s hardly the case.
@Redsoxmaniac
You make very smart and valid points.
Our business model is patterned after similar business models for optical disc technology such as DVD and Blu-ray. We don’t own or sell content, we provide a format in which content can be sold directly or through retailers similar to optical discs.
I will give you another advantage we have that we don’t see services like iTunes and Hulu able to readily provide:
Why did JVC’s VHS format beat out (the much better) Sony’s beta format?
At what point did DVD began to get really popular (besides the PS2)?
Why did blu-ray really beat HD-DVD (besides the PS3).
What is the single most successful genre that practically fathered the early growth of the internet?
There is 1 industry that dominate then all in terms of revenue and has sold more VHS and DVD media than Hollywood.
That’s right, the $12 billion a year adult industry.
The key to success for any “media” format such as VHS, DVD, and Blu-ray has been the format’s ability to deliver any kind of content without discrimination.
iTunes and Hulu are proprietary services where not just anyone can sell content there, but anyone can manufacture DVDs and Blu-ray discs, and anyone can make MuuVii releases and sell them from anywhere, even directly in comment sections like this.
Example of what’s possible: Do a Google search for Star Wars? A purchasable MuuVii file can be directly linked in a search result ad for all 6 films in cinematic 2K HD on the spot. How about we turn Adwords into a digital retail hub for music and movies. MuuVii is the only format in the world that can make the world’s #1 search engine instantly into the worlds #1 digital media retailer. We really did our best to think about the next 50 years of entertainment and Facebook Connect filled a huge piece of what is required to make both content onwers and consumers “happy”. My question, who with a credit card and actively purchase entertainment goods does not have a Facebook account?
Logic:
A platinum music album in USA: 1 million people
An American Idol telecast: 30 million viewers (peak)
Amount of people who filed tax returns as of today: 120 Million people (USA)
Facebook membership: 200 million+
Our demographic all have Facebook accounts.
Further, the advantage with MuuVii is simple, there are simply no limits to what a content owner can provide. A new HD codec comes along like Dirac, no problem for content owners to use it with MuuVii to deliver it. Are you a government agency with your own custom codec or DRM protected files, no problem, this format delivers this also.
In response to your other point, the NBA would use this format at their own discretion, and would be able to deliver purchasable or rentable content with ease.
There are many security measures in place within the format and we are confident that in the long run, the format will speak for itself.
I say long run because our first priority was to figure out how to operate with no debt, so MuuVii files made today will last forever, if iTunes and Hulu (god forbid) decided to stop operation, their media is no longer available.
@Rodney
+1 agreed.
You can’t go on iTunes today and find The Beatles Discography and purchase it for say $120.
But… in the torrentsphere finding such a package is nothing, IF a person indeed knows how to use the technology.
The Dark Knight made over $500 million is box office draw. If torrents and file trading is really that much of a menace (it is pesky to profits), people wouldn’t still be buying the DVD, Blu-rays and the web versions of this entertainment.
@Zach Weisman
Blu-ray uses MPEG-2, an older codec at bit rate up to 35MBPS.
Newer codecs like VC-1 (WMV AP) can achieve similar results at only 1/10 of the bit rate
You can however stream 35MBPS but all of your customers would need powerful computers with at least a 50MBPS fiber connection.
Yeah, that’s a great idea in theory, but facebook continually screws over their 3rd party app developers by changing the game.
Its become nearly impossible to go viral anymore –
the “notification” system is completed abused to the point of verging on spam
you have to get “certified” now for a “badge” – basically, pay to get your app approved
they make changes that break apps with very little notice…. all of this is very frustrating to developers and if you have an app to support your existing business, its a full-time job just to maintain it and keep up with the API changes, something some people can’t afford to do.
And since the changes, the popularity of the apps has gone way down, making it even harder for 3rd party developers – don’t be fooled into thinking facebook cares about you.
Of course your right, this is why we are not building anything that is “embedded” into their site location. Our perspective is to use the power of identity and friend connections to enhance the ownership of digital media.
Dumb: hooking your application into your own API keys so when your app gets popular, Facebook can mob you in and tell you to “give us a piece of your company and pay up or else”.
Smart: Build your app as a middleware component that require your users to enter their own API keys in and if their use of your application becomes popular, then they have to deal with FB API charges directly and your business operation continues to generate huge profits without the FB tax.
In research of the FB API model, we took the smart route. I believe the money is in tying FB Connect with outside applications and then in turn providing middleware components for your users that move liability away from the technology provider.
You will see a billion dollar start-up using Facebook as a core feature, and because of the API middleware capable loophole, FB will be forced to stand by and watch another company make more off of FB than FB themselves.
Like I said, with 200 million+ users and an incredibly powerful API, they have more power than they currently realize. Once the first breakout application can prove that masses of revenue can be made using the FB API, then I will expect that FB will start to charge fees for API access, and rightfully so. I am just happy that we were able to figure out our middleware strategy before we hardcoded our FB API keys into our application
Sorry guys, i cant edit the wrong “your” to “you’re” above.
William,
Until the first breakout application makes tons of revenue using the Facebook API, I don’t see anybody making a serious investment in it. After all, how are we certain that Facebook users are actually going to buy the product?
I wish there were an edit feature here for occasional misspellings.
Dan,
When your “pitch base” has a documented demographic of 200 million compatible users, this is a heavy sign of a worthy venture.
Match this with the biggest revenue generating source, the entertainment media industry, and attempt to great the perfect application to proxy the two.
Correction: Match this with the biggest revenue generating source, the entertainment media industry, and attempt to CREATE the perfect application to proxy the two.
M.A., TC, doesn’t WP provide some type of editing plug?
My mother is a very religious person and you believe in Facebook and Google more than she believes in God. We get it, you believe goog will have a trillion dollar market cap in 2 years and Facebook is, well, worth 20 times what their present term sheet suggests.
Please return to your padded room
Time to get serious about monetization.
$2B is a HUGE valuation! It’s funny the article presents it otherwise, shows how illusion becomes reality. If their revenue is ~$300M per year, that’s over a 6x revenue multiple — and that’s revenue, not earnings multiple. Huge.
The significant number is how much money are they raising? Do you have that number? THAT’s what will show how much the ‘low’ valuation hurts.
and why is it valued at 2 billion $? cos it’s spending at the rate of 20 million $. Translating 200 mill users * 2bucks(they spend) * %x totally absurd!!!
If facebook charges its users a $5 yearly subscription fees, I am sure that most users would be happy to pay for that, since I guess that the majority are already hooked into facebook. After a year, then they should raise the fees to something like $10.
I just finished asked my 85 friends over Facebook — all but 2 users agreed that when FB will start charging they may pay a month or two UNTIL another platform will come around SIMILAR to facebook but AGAIN FREE !!
this gaime will never ends.
facebook will never make +
People have been saying they wanted to leave Facebook since it first began. But people are hooked.
In a sad way, if Facebook charged its customers, it would lose half of its users in the first week. But the other half would pay ( if its less than $10 ), they would cut costs on storage ( since people left ), and they will still build upon people who want to go into the walled garden.
Since Facebook is now an evolving yearbook, people have put so much time into it that I truly believe that they would pay just to keep it. When people put time into anything: their pets, their schoolwork, their guitar, no matter how much crap they talk about their hobbies, most would do anything to keep from giving it up.
I could see the opposite happen, but I have always hear people threaten to leave Facebook. Only four of my friends ever left, two came back, and one got married and doesn’t even use the internet.
I don’t believe this will happen, nor I believe in what I am saying. I can only see by current observation that I wouldn’t be surprised if it happened.
As for myself, I would gladly pay $10 to use Facebook a year.
Yes, but how many millions of facebook users would have to get mommy or daddy’s credit card to continue in the game? Moreover, how many users don’t have a credit card? Not only are many users overseas where payment processing hasn’t been fully adapted, its very expensive to process trans where available. Also, studies have shown the avg. FB user isn’t — how to best say this — affluent at all
WOW o WOW o WOW! This is a major scoop and proves beyond a shadow of a doubt that this company is hosed! Their employees will ALL be under water in terms of stock upside so no reason to stick around any longer.
They are failing — fast. Time for a new board and ceo in my opinion.
It’s really surprising to me that MZ and his team cant come up with a suitable business model. Obviously Zuck got greedy after the $15B valuation and is now feeling it while investors are only wanting to submit term sheets “at around $2 billion”. Yes I agree that the previous $15B valuation was overstated and for obvious reasons we can see that now that FB is in a frenzy to raise more cash because its monthly cash flow is negative. I can think of a couple ways that FB could generate additional revenues but Zuck is sticking his hand too far in the cookie jar and it will be interesting to see what comes out of all of this.
Marc Andreeson said that Zuckerberg wants to make FB the next microsoft – well I definitely dont see how he’s going to do that but good luck Bud – should of sold
Andreeson also said FB could turn on the cash spigot tomorrow and make $1 billion a year. I actually laughed at the TV when he said that on Charlie Rose. Andeeson has a really dry sense of humor, but it works!
How is that sense of humor when he was serious?
Great scoop Mike, and nice depth on the anti-dilution provisions. What I don’t understand is why new users would increase Facebook’s cash burn. Yes, growth requires new infrastructure, but even with its current revenue model, surely the incremental cost of a user is lower than the incremental revenue.
And yes (yes!) my fellow commenters, Facebook bills itself as a utility, so it should charge that way too. I can’t even talk about this anymore without sounding like a crazy, lonely freak. When you create something of value, people will pay for it.
Umm…no. The incremental growth they are seeing is actually more expensive to them because it’s coming from new markets (like Turkey) where they don’t have a good (or in same cases *any*) model to monetize the growth. If they stick w/the ad route for revenue they need to build an ad network that rivals Google (expensive) or partner locally where there are significant ad networks already in place (big BD buildout needed).
Good points, though I don’t think that refutes the premise that it may be a good idea for Facebook to charge users for some kind of premium access based on messaging or photos.
that kills the beauty of internet where everything is always free.
you may be right with something valuable should cost. but internet its own is too young and its been a place of FREE market for too long to change peoples mind and set it in a new direction that they WILL pay for value. no way dont see that happen in next 10 years minimum.
Ever bought an iPhone app?
thats a different story. I assume that somebody willing to pay $299 for phone while you can get a “regular” one for $19.99 puts that person into “ritch” or at least: willing to spend money for software toys (and apps) shelf.
As of FaceBook, you can be homeless and still use it for free
make sense?
Redfin, stick to real estate. Good comeback Danny.
hard to believe given that there is an active secondary market in their stock at $4bn to $5bn.
Well, when press is involved cui bono .
Wrong Fred. There are too many employees running around trying to sell stock. I had a vc ask me recently if i’d buy at a $1B valuation because that was the ‘ask’.
You guys must all be too young to remember PointCast circa 1996, the failed “it” company of the day:
“At its height in January 1997, News Corporation made an offer of $450 million to purchase the company. However, the offer was withdrawn in March. While there were rumors that it was withdrawn due to issues with the price and revenue projections, James Murdoch said it was due to PointCast’s inaction.
Shortly after not accepting the purchase offer, the board of directors decided to replace Christopher Hassett as the CEO. Some reasons included software performance problems and declining market share. After five months, David Dorman was chosen as the new CEO. In an effort to raise more capital, Dorman planned to take the company public. A filing was made in May 1998 with a valuation of $250 million. This plan was abandoned two months, in favor of looking for a company with whom to partner or be acquired.
…
Due to delays in the project, Dorman resigned as CEO in March 1999. Two weeks later PointCast were informed that their planned acquisition had been scrapped. In the reorganization that followed, 75 of the 220 employees were let go in an effort to reduce costs. A number of bids were made to buy the company including two from former CEO Christopher Hassett, which were rejected.
Instead, they sold out for about $7 million in May 1999 to Launchpad Technologies, Inc., a San Diego company founded and backed by Idealab, and the PointCast network was shut down the next year.”
http://en.wikip...wiki/PointCast_(dotcom)
cool, but I personally prefer the Lycos story
“On August 2, 2004, Terra announced that it was selling Lycos to Seoul, South Korea-based Daum Communications Corporation for $95.4 million in cash, less than 2% of Terra’s initial multi-billion investment [$5.4 billion]”
thats a drop $5.4B to $0.095B…. WOW
http://en.wikip....org/wiki/Lycos
Once again, ads NOT primary monetization strategy for our “next big thing” that will blow FB away. Just need to develop it into Beta.
Fred,
You bought too high in the secondary market.
All,
As a coda to the PointCast tale, Hassett was fortunate to score a $40M exit with PrizePoint before the boom ended.
http://www.busi...17/b3626167.htm
I’d pay $1 a month to save Facebook. $20 million in the red just became $180 million a month in the black. Problem solved.
i wouldn’t.
Lemonobrien hates facebook, he rather use his empty directory that I have no clue how to use.
If they implement that plan, their valuation should be around $4.3B. That is, of course, assuming the full conversion rate. In reality, people like “lemonobrien” will drop off and each person dropping off will have a non-linear impact on the value of the network as a whole.
60% will move to competitors who “wont charge yet” like MySpace, others will join other companies and their websites, who knows maybe the new startups will arise as the FB giant will be declining…
Other sites don’t allocate friends like Facebook does. If Myspace starts allocating friends by specific locations ( schools, towns, cities ), then I could see a change.
As well, the custom css in Myspace kills browsers. People just splash flash and apps all over, and after three pages I can’t even use Myspace anymore.
But maybe there is another Facebook.
why even that much. give it away for $0.5. Sure they will lose a lot of users, but i’m certain around 80-90 million would remain. their costs would go down and they would FINALLY be making a reasonable amount of money.
after a while everyone would start coming back again
Worth every penny!
Take the money and run.
Why isn’t anyone looking at the end user? The reality is, people have been getting a really great online service free for months now. Facebook has brought me together with tons of people I never would have connected with from my past. It is a marvelous platform and while it has its faults, It is now a web destination that is top of mind.
But they HAVE TO MAKE MONEY. So, why not simply communicate this to your users directly? Just tell them they can continue to get the same services (and more as they are developed) but in exchange, they have to choose from 10 templates that have subtle advertising (logos, etc) in the background or something else that is laid back.
Don’t beat the end user over the head with advertising, just let everybody know that the free lunch days are over and everyone is going to get a little exposure to some light advertising in exchange for their free acccount. You may lose a few members but who cares, those that are loyal and stay will help Facebook move towards profitability.
The ability to connect with friends and family is one of the driving reasons behind the success. I also rate Facebook Connect and feel that there is a lot of potential there for revenue.
Where were all of you guys way back when I said they were worth that when people and FB were floating around this crap about US$15 billion. In fact I think I even downgraded them to 1.65 bill (Near a YouTube deal). Most I ever gave them was 3.5 bill tops.
But who cares when you are supposedly burning 20 mil per month on free loaders
So they sell and the owner acquires another Skype/ebay junk. All those cool user will jump ship to another hip and cooler site in 3 years anyway. So when would the buyer earn back his money?
Now Twitter certainly has some future value in respect to this live search thingy. I admit I did not even see it (the live search thingy) until Guy Kawasaki posted in on Twitter. Though I knew there would some value in the data.
But so what. Twitter is not as large as FB, so big deal. Can U imagine a Twitter with 200 million users a over 1 billion tweets per day? Shit that would be 30 billion tweets of shit per month. Dam.
yes and you could join my tweeting: 8am “just woke up with a morning wood”, 8:30 “brushing my teeth (that toothpaste has a great taste!)”, 9am: “I just took a dump!! what a relief!!”.
hey!! I am still under 140 chars!!
you are obviously a nut case and you jokes suck
That is funny… Twitter would have worked well in the movie Idiocracy.
That aside, there is no doubt that FB provides value and has allowed a new level of social interaction. I agree that the ad revenue model is whimsical and certainly subject to cannibalization and fluctuations in bid prices. I think having an annual subscription of a nominal amount might not be all that bad. We bitch about the cost of cell phones but know we couldn’t live without them. There are some that live on facebook and would definitely pay $10 or $20 a year to keep it. Perhaps they could also offer free membership to .edu accounts to keep the spirit of how it started alive. I wonder if they might also be eligible for some of the bailout money… hmm?
WOW:
Facebook Stock Traded Down To $3 Billion
http://www.busi...-billion-2009-4
Once people start dropping off it will be a domino effect. People join because of the large population, but once people start leaving, well then, why the hell would I want stay?
Just like a night club. Then they’ll start playing hip-hop and they’ll leave even faster.
LOL
When has anyone ever flocked away from a big site as huge as Facebook in the history of the internet?
People give end users credit like they are all a bunch of Che’s ready to raise their fists against the man. Most of the users didn’t even vote, and now you think they are going to leave?
How many people have ever really canceled an account? I never have in my life. Not because I never disliked a site, but because I am lazy. End-users are lazy. If they weren’t, they wouldn’t need Facebook to have to keep in touch with friends. The phone, text, and email were all there before Facebook.
Facebook works. Period. Hate it or love it, it might hit a wall, but barring a total financial collapse of the economy and/or company, it is here to stay.
I think heavy facebook users are too caught up and emotionally entangled to look at the company honestly. The same goes for the people pumping Twitter up today. These things may turn out to be nothing more than passing fads, like the other user pointed out with PointCast, if you’re been on the internet for the last 20-30 years, you’ve seen you’re share of supposed ‘world beating’ companies rapidly rise, and then rapidly decline.
Not even Google is immune, but honestly, if you look at the fundamentals, it’s a lot more immune to rapid decline than FB or Twitter. It might seem like FB is extremely sticky, but supposedly, so were most portals, most webmail, and MySpace, yet we saw how easy it was for users to migrate. When the cost in $ is free, the switching cost amounts to an annoyance of time investment only.
I like Warren Buffet’s concept of a defensible moat. Does FB have one? Is it big enough, and even if it were, is there really a business model that makes sense?
also i think there is a problem that only search has been monetized well on the net (hence google’s gigantic coffers).
Even google has had difficulty monetizing social network traffic.
Facebook, if it plays its cards right could have another 8-10 years worth of being at the top of the heap.
Some of the snazzy card playing would entail:
-beefing up the virtual goods market(a multi million dollar earner already for fb)
- charging for advanced features(say $10/year)
-refining their ad placement and distribution strategy
I’m not a big facebook fan, never saw what the hype was about but ppl who blab about folks would leave in droves if they had to pay. Facebook is not quite like anything else out there…now they have to be smart in presenting the case for a subscription model and shoot for a buy in percentage of about 22% of their current user base.
The point that people are missing is this:
Even if there was an ultrahip facebook clone out there that you wanted to try..i don’t hordes of fb users “leaving” fb for anything. Especially NOT soley on the basis of facebook charging some rediculously cheap fee.
REASON?
Let’s do the math. If you’re an fb user that has, umm..let’s say upwards of 200 “friends” and upwards of 100 pics in fb, plus all those comments…the cost for you (in time and energy alone)to replicate that on another site is more than 10 a measily $10 subscription fee.
So fb, grwo some balls and start making hardcore decisions to actually show you have some business sense and are intent on generating revenue to support your service and growth.
Amen!
A $2B valuation is about 7x earnings for FB. That’s damn low. For context, that’s the ~same as GE, and they’re a shrinking cow.
Facebook would be crazy to take this.
Facebook has earnings?
Try 7x revenues, which is insanely high. P/S at GE is 0.67, so that sets FB’s valuation at $201M using your method. God, please tell me that you are not a VC.
Exactly. The real question is how much do they have to RAISE, given that they’ll never get over $2b valuation? Can’t Arrington find that out? Because if they’re looking for $1B they just gave up half the company.
If its $4Billion MSFT should buy them. Only MSFT will be able to spend soo much and it gives them a very good hold on the social network arena
Its baffling that with such a huge, dedicated, growing user base that Facebook is faced with this. Clearly, they need to find a business model.
I don’t think Google went through this… their story is similar: total focus on a great user experience only to find their business model later.
Haha $2 billion valuation. A fool and his money are soon parted. Sounds like Fred is in that group. If you can find enough liquidity in FB stock to trade up, then good on you.
Anyone who thinks they can invest in FB and actually see a return is living in a fantasy. FB doesn’t have an icecube’s chance in hell. A few weeks ago Arrington was convinced they were in the green, EBITDA. Why would a company in that position be making such a drastic compromise?
FB is like a tarpit for capital. Drawing in the smart guys who think they can win a mammoth prize. There is no way FB can ever make money. Too big, trying to do too much, now chasing too many other innovators. They’ve overbuilt and if they pull in their horns, users will sense the end is near and will flee somewhere else. Check mate, no moves left. Now we’re just waiting for the clock to run out. I’m sure a few lemmings will jump on the stock before it’s over though.
I would imagine their talent pool of employees will start to drop like flies once everyone realizes they are not going to become instant millionaires.
The IPO route is shot in this economy. You really have to have the right timing for that to work. There’s obviously no focus at the company. They are trying to do too much. It’s like they are trying to reinvent the Internet within their walls. But what sense does that make? Mark and Co. got drunk off their own initial success and lost touch with reality. Read what they say in interviews and you will see just how insane these people are. Mark and other execs talk about facebook like it’s the second coming!
When all is said and done I think history will view arrogance as the thing that brought facebook to its knees.
Clearly, this story is speculation, unless someone has actually seen the term sheet. What would be really interesting is if Facebook had *really* been expecting to get a $15B valuation in this round. Seems to me, that would be exceptionally naive on the part of management and existing investors.
Why? Well, here’s the question a new investor might ask themselves in a situation like this, “If the company will IPO in the next year (or two), what is the likely valuation at IPO?” With that number in mind, it would make sense to put money in at 30% to 50% of that value. Otherwise, how could the investor possibly make any money?
So, to run a couple of scenarios…
If someone invested today at $15B, that means they might expect Facebook to be worth $30B to $45B at IPO. For that kind of valuation, Facebook would need to be making *profits* in the range of $1B to $1.5B per year. Realistically, that might require revenues in the range $5B to $7.5B per year. Does that sound likely to you? It doesn’t to me; but then I haven’t seen Facebook’s actual numbers, so I have no idea.
If someone invested today at $2B, that means they might expect Facebook to be worth $4B to $6B at IPO. For that kind of valuation, Facebook would need to be making *profits* in the range of $130M to $200M per year. Realistically, that might require revenues in the range $650M to $1B per year. Does that sound likely to you? Well, if Facebook has a business model where they can become profitable, and its revenues today are $300M per year, and growing fast, then might be at least *possible*.
So, if you believe that Facebook will be a success, putting money in at $2B valuation at least seems reasonable. If the existing investors think they’re getting hosed at that price, they could always do an internal round. Whether they’d think that would be credible to the bank that would do their IPO is another matter…
Great conversations here!
What will be will be ! It just returns the correct valuation. No surprising at all. Is it a lesson for Twitter ?
People here who talk about turning the site into “everybody has to pay a dollar” to keep it afloat forget really simple thing. The reality is that there are not enough payment ways. Credit cards are not very common in certain places – Asia, Africa, Middle East and even in some parts in Europe. Every person here does not have like 2-5 credit cards. Even if they have credit card they probably have one. That is one of the mayor concerns in e-commerce. And transfering money through bank payment is just silly – if you send Facebook 1 dollar the bank will take like 3 dollars just to send that dollar overseas >)
Besides why would people pay for content that they create? Thats really true that they don’t even have a moat to defend themselves if they try new monetization ways.
Hopefully the bubble will burst before its IPO. Do we really need another Wall St. crash??
The end of free web services is nearing.
Anyone notice that Facebook overnight seems to have limited photo uploads to 8 at a time and possibly per day from what I can see? THis valuation must have spooked them.
2B seems to be very less considering FB has far better streams of making more money then youtube. I guess time has come to launch Facebook Pro. Added service for few dollars per month can easily make millions for facebook. By now it should be obvious to everyone that ads are not the way to monetize social networks
Facebook usage has dropped since their home page redesign and Twitter signups skyrocketed simultaneously. Both companies are overvalued and have no worthwhile monetization strategy.
The silicon valley self-sniffing fart bubble is bursting 2.0
Thankfully for Facebook they have a massive user base, which is the only thing that will sustain a valuation when they are forced to sell to Google or Microsoft at somewhere between $500 million and $2 billion in the next 2-3 years. There will never be an IPO, this isn’t 1998, you need real money coming in to go public.
Anyone who pays more than one million for this is damn foolish. They’ll never have an advertising base to support that valuation. Does anyone still use Friendster? Social networks are too trend based and not worth any long-term value.
Buyer beware.
All about Facebook @ http://search.m...p;sa=Search#931
No doubt social networking sites are getting hit by recession. It is predicatable that in difficult times people will be spending time to find a secure source of money rather than trying to make friends online.
Innnear future we may find facebook being sold to say Google. But hey google has Orkut.
Nobody knows if people can get benefit from social networking sites anymore.
So I can just hope Facebook doesnot go for a sale, but I am not going to do any social networking to save it either.
I started working in the tech industry about eight months ago, just after I finished my undergrad back east. The first day on the job, I was talking with my bosses about a really hot of-the-moment start-up (hint: they do an outlook plugin). I asked them how the company would make money – sure they had millions of users, but short of a buyout, how would they monetize? My bosses reply was that in the Silicon Valley, you worry first about gaining an audience, then about your business model. This struck me as a terrible way to go about business and I let them know this. They brushed off my cynicism as ignorance or naivety, but look who’s talking now. I stand by what I said and still believe that if any of us are going to get rich from a start-up, it better have a baked-in business model. Too many of these SV companies put all their eggs in one basket – relying on advertising as their source of income. I for one almost never click on ads, and think that if companies keep believing that they’ll make it big from ad revenues alone, they are sure to end up in the dead pool.
And this has been the Silicon Valley “in-crowd” game for some time:
Burn cash advertising and promotion to get a large amount of users, then when in despair, raise more cash based on the users secured or go public with an IPO based on the “promise” of selling ads or falling back to some kind of Adsnese clone model.
Facebook will need to find a revenue stream because people spend more time there as a “web hangout” similar to Yahoo for mail or Google for extensive (re)searches.
Twitter does not need to monetize because they provide 1 core feature that is the best at what it does. Twitter can sell for $2 billion to a company like Google and because Google has such a lucrative revenue stream already, adding a Twitter to their arsenal only makes their search (tweet search) and Adsense placements that much more lucrative.
Facebook to Google is competition if Facebook ever decides to “Adsense” their advertising platform, which I am sure is being considered.
Facebook are very smart and they are carefully weighing their options. Again, you don’t create something that amass over 200 million users in such a short time because your just lucky.
If Facebook decided to charge a $5 yearly membership fee for premium access, sure as hell I would pay and you would too.
All they need to do is provide a premium “yourname@facebook.com” email address and start a premium dating service (many people use it for this anyways) then you have an easy path to the money.
LinkedIn does pretty well with their premium services even starting at a hefty $19.99 a month.
It’s not hard for Facebook to start the flow of money, I am under the impression that maybe they are working on something to add to the site before they begin to open the payment gates.
Will, cant agree with everything althought you pointing out good points, bro.
I cant agree with your opinion that”you dont create something that a mass over 200 million users [...] because you just lucky”. Well, it is honestly 80% of luck, the rest is application itself. When you start designing any application you never set the goal whether for 1,000 users or for one million, or for 500 millions. You just go with the flow. There are other applications out there similar worse or better than facebook in functionality, but in IT like anywhere else popularity waightes alot. Facebook got lucky with good name and clean outlook. But thats not because there are bunch of geniouses working behind it, nope. If that would be true, you could always take 50 nerds put them in a box and came up with a multi-billion company. Unfortunately, it does not work this way and this world proved you got people not-too-smart getting ideas and technology in place and walking away as million- or billionares, yet you got smart people with great experience going nowhere, shutting down their ideas..
You may want to pay for facebook even $500 a month if you feel so. Me and bunch of my friends will NEVER pay for that kind of application. And neither EVER we would have to. There are other fish swimming in this pond and once Facebook will limit itself to some kind of fees, other will jump on subject and create new, (who knows?) maybe better application again being free of charge. Thats simple. As of email I totally dont need another email address, no thank you sir enough options around the net.
You cant anyhow anyway compare students social platform where people go to chat and exchange some info with LinkedIn which is focused on business and workers profiles. They can charge even $50 a month and I WOULD PAY because I know how much advantage I get all the time from being visible online thorugh that application so my business credit can stay high. Nowhere to compare with FB.
It is indeed VERY HARD for facebook start the money flow. If it wouldnt, dont you think all VC and owners would jump on that horse long time ago?? Nope. They all can imagine users decline going sharp up versus myspace going down because guess what again other fish in pond, and FB will never be paid platform until others do so. The moment they start charging for content YOU and other users PROVIDE, thats their end.