Facebook officially entered the stock market on 18 May. The initial public offering with a price per share of $38 valued the company at more than one billion dollars.
Facebook’s earnings are extremely tiny compared to its size: $5 per each user per year. Imagine if a store, cinema, airplane or train would earn the same amount for each user per year; such businesses would most probably already be bankrupt!
Apple makes computers, tablets and phones, Amazon sells books, CDs, DVDs and other stuff, but how does Facebook make money? So, what are Zukkerberg and friends selling? Well, it’s us. Facebook sells its users and the information that they disclose.
To date, the lion’s share of Facebook’s income has come from targeted advertising. Your personal information, interests, marital status, religion and sexual orientation are all used to target you with specific advertisement. Farmville, a “free” catch game, where users end up paying for virtual sun, rain and fertilizers, accounts for another 12 per cent of Facebook’s income. Recently, as the exchange of posts and status updates has grown into an intolerable traffic jam for attention, Facebook has started charging for giving your posts prime location over others. Facebook recently ran a test in New Zealand offering users the chance to pay up to $2 to guarantee that all their friends would see a certain status update. Would you be ready to pay for that?
The fact of the matter is that the internet is just a tool. Like any other tool it very much depends on the user, and at the same time it shapes those who use it. The internet has certainly changed our lives and made communication, flow of information and handling huge amount of data between different people around the world look like a videogame. We are mesmerised by it and we want to use it for everything like a miracle remedy. The same thing goes for the so-called “social media”.
Facebook is not the first attempt at Social Networking. Orkut, Classmates.com and MySpace, to name a few, had decent trials. Orkut probably shot itself in the foot by being an invitation only network – a mistake that Spotify also abandoned in time. MySpace on the other hand gave too much freedom to its users. Every page looked totally different. Facebook was probably the most successful in raising capital and media attention.
In the “bread and circus” context, Facebook would obviously be a circus of the digital kind, where we tell each other about freaks and oddities, gossip and non-information, which would make no difference in anyone’s life. How many times have you ran into a Facebook “friend” in real life without recognising him or her? It’s hard to recognise people from their Facebook pictures in the first place anyway. So is Facebook really a networking tool or a thumbnail collecting craze, somewhat similar to the almost extinct hobby of philately (stamp collecting). Lots of philatelists, in fact have enjoyed their hobby for the correspondence and friends that they made through it.
Does It really matter if you have millions of “likes”? While lots of companies and organisations ask for it, they unknowingly advertise Facebook by putting the white “f” in the blue background on their webpages, newspaper adverts or even shop windows.
The most liked pages on Facebook start with Facebook for Every Phone, with more than 88 million likes, then comes “Facebook itself with 66 million likes, and the rest of the top ten are Texas HoldEm Poker, YouTube, Eminem, Rihanna, Lady Gaga, The Simpsons, Shakira and Michael Jackson, each with around 50 million likes. Well, we know they are popular, so what?
FURTHERMORE, if you don’t have the patience to wait for the likes to grow, you can buy them in bulk: 1000 “likes” will cost you €67! You can also buy Facebook friends and fans if you feel lonely.
Facebook had “only” 100 million users in August 2008. The rise in popularity has been phenomenal. But the falls in the digital playground could also come as unexpectedly and be as steep. The hype seems to be in the past; lots of users are visiting their profiles less frequently. Some advertisers, such as General Motors, have already announced that they will discontinue using Facebook as advertisement is not what users log in for. As the guru investor Warren Buffet also declared, I wouldn’t rush to buy Facebook shares anytime soon.