Recent media attention to Facebook and people associated with it is just phenomenal. In late 2010 Facebook became number one site, in terms of unique visitors per month. It passed Google in October and November of 2010. Also, in 2010, Facebook crossed 500 Million users mark making it 3rd largest community on earth behind only China and India.
Just past week, Goldman invested 500 million in Facebook and rush from its clients to buy a piece of Facebook shares is frantic. In this same article, columnists note:
Wealthy Goldman clients have been jockeying for a piece of Facebook since the deal was struck last weekend, a situation reminiscent of the technology bubble of the late 1990s when online-grocery seller Webvan Group Inc. and other upstarts with far shorter track records than Facebook sold stakes to investors.
All, these numbers raise a question - is it all really worth it? What's the Facebook's value add to the end users? And, is Facebook really a big life changer, or just a craze?
Google Vs Facebook
Google, since its launch, has provided a distinct value add for the end user. It has, for most part, proved to be a solid search engine where people go to search and then, from there, go to other websites. Although, Google news and Google Maps are another features of Google widely used, Search is what has made the life of end users easier and, to the extent, better. Compare that experience with Facebook and I am not sure exactly what value does Facebook provides for the end users. As one of my tech executive friend puts it, a typical Facebook user is just a data entry operator who does data entry for Facebook and other B2C companies. I couldn't agree more.
Value for the end-user
I think Value innovation and addition by Facebook for the end user is almost zero. There is hardly any feature in facebook, that was not there before in some way or the other. On line communities(Yahoo Groups), emails (for direct communication), chat, groups, Photo sharing (picassa) - all these features were already out there, for years, and people were using it, also for years. Facebook only packaged these features in a nice single interface. So, Facebook's direct value add to the end-user is zero.
Value for the Businesses
Businesses that benefit directly from marketing via Facebook are primarily B2C businesses. Considering that Facebook's large user-base is primarily consumers, B2B businesses do not benefit much from Facebook. They instead opt for Google Adwords or LinkedIn for their marketing dollars, and they will continue to do so. In addition, B2C businesses currently marketing on Facebook will see their ROI decreasing as the time goes by and as their fan base grows substantially.
End user profile and impact
- Spending power of the end user - Generally, people with high spending power like to disclose very little about themselves online. These are the people that B2C companies would benefit more, however without much Facebook participation from higher-spending power folks, companies marketing on Facebook typically have large fan base with not many spenders.
- In-active users - Many end users on Facebook are largely in-active. They only listen but don't talk. I know many of my friends who prefer to talk on GroupOn or FourSquare instead on Facebook. I personally think GroupOn has better value proposition than Facebook.
- Disguised users - During my recent trip to India, I talked to many young children (age group 10 - 15) who have created Facebok profiles for themselves falsely stating that they 18+ in age. They are really heavy users of Facebook, but how much business do they give to companies marketing on Facebook?
- Psychological impact - This is a serious issue and deserves much more attention. In his book Nicholas Carr correctly says that - man makes a tool and then the tool makes a man! With instant comments, or lack of them, desire to put pictures online, disclosing intimate personal experiences and basically trying to be what you really are not does create long-lasting impact on a person in real life. I think this is the most serious yet neglected side of the Facebook.
Looking at the some of the past companies, at-least at this point of time, it appears that Facebook might be following more Webvan than Google.