Epic blog post on eve of Facebook’s historic IPO — coming soon
I’ve been planning to devote much of today to writing an epic blog post on the eve of the historic Facebook IPO. But I’m not sure I have it in me — and I’ve got a lot of other things to do as well.
However, if I do write the post, here’s how it will unfold.
First, I’ll establish my (cough) psychic powers in the opening paragraph with a true story. Next, I will guess how Facebook’s stock price will fare in the short and medium term.
But the really exciting part will be in trying to predict how the Google vs. Facebook battle will play out in the longer term — over the next few years.
I will explore Google’s search-based revenue model and how getting a billion users registered on Google+ (even with minimal engagement on plus.google.com) will generate billions more in annual revenue for Google — even if it never places ads on its social network. This is genius.
I will also explore Facebook’s revenue challenges and opportunities. Selling ads around user generated content has always been tough. Especially if your users are “heads down” (not easily distracted) because they are engrossed in meaningful content generated by family and friends. Facebook’s ad click through rates are about as low as you will see anywhere, on any web site.
But Facebook accounts for a significant percentage of all page views on the web. That is an astonishing achievement. They are profitable, growing, and will have a war chest of billions of dollars for acquisitions and to experiment with new possible revenue models. I’ll discuss several ideas that I think Facebook will pursue in the coming years to try to grow into their current market capitalization before the market punishes them too severely.
My conclusion is that I would much rather be Google than Facebook. But I also celebrate the fact that it is a great time to be entrepreneur/developer. Imagine two of the world’s smartest and most valuable companies trying to entice you to build products and services on top of their billion-user social graph. Both companies will be providing awesome APIs, viral distribution opportunities, and monetization options that will help startup companies grow incredibly fast and get to profitability fast as well.
Tomorrow a lot of fortunes will be made when Facebook’s stock trades on a public exchange for the first time. And in the coming months, more fortunes will be made (and lost) as millions of shares trade hands with this stock — which is surely going to be very actively traded and very volatile.
But the bigger story is that in order to win the future, Facebook and Google are building open platforms that will attract huge numbers of developers and entrepreneurs to create apps, attract customers, and build value on top of their social graphs. These entrepreneurs will build fortunes by creating value in the marketplace, not by getting lucky in a volatile stock market lottery.
In the next decade, I expect to see scores of billion dollar companies built (and built quickly) on top of Facebook and Google+. That is where my attention will be in the long run, though I admit that tomorrow I’ll be watching the Facebook stock ticker all day long.
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