Tuesday, October 12, 2010

A very not typical thought of Facebook

I am not a heavy user of Facebook but I am aware that Facebook is big (500 Million users) and that many people are spending half of their internet hours on facebook.
The question for me is, why got Facebook so much bigger than other social networks. Surely the rollout concept was brilliant. Allowing only school by school to access FB gave Mark Z. and team to control the growth. This was an important step for FB to grow with demand. The idea that everybody uses his real name instead of an alias was another important step to give FB a tool we trust.
Not allowing ads at the beginning and even now only limited helped as well.
But I think the biggest strategic step was to build a cloud portal open for all kind of developers. The best applications in FB are not developed by FB, they are developed from some of the 50.000 developers who are contributing to FB. Facebook has right now over 550.000 applications.
This was the most important success for FB.

But when FB started there was no real smart phone and not much possibility to use the Facebook applications outside of FB. Facebook has a mobile version and a touch version but many of the games are not working on mobile devices. The Facebook application for iPhone is too limited for my understanding.

Now let us make some assumptions. If FB does not go public in the next 12 months and is not able to bind developers to FB what could happen?

Facebook has only one product, which is their website and is relying heavily on 3rd party applications. Most users spend their majority of time on applications on facebook.

What if the developers are getting pretty upset about FB because one or the other way they have to give FB 30% of their revenue.

What if the top 10 developers would take all their games and apps out of facebook and develop their own social gaming platform with all games either available over their own Internet hub or as mobile download?

FB would lose instantly $300 to $500 million revenue. FB would lose 510,000,000 MAU. MAU stands for monthly active users. The number is of course not reflecting that an user does uses multiple apps. Therefore I make it easy and just take one Zynga game. Farmville has 61 million MAU (source: allfacebook.com) just taking the traffic away of these users playing Farmville would take Facebook tons of ad space, time spent and visited pages away.

Top Developers
Name MAU Daily MAU Growth Weekly MAU Growth
1. Zynga 220,812,452 172,702 17,822,700
2. CrowdStar 58,224,256 663 -2,121,063
3. Electronic Arts 47,178,980 1,509 -490,560
4. Pencake Limited 37,135,404 233 21,925,435
5. Playdom 36,387,171 57,571 4,548,663
6. Causes 25,146,256 0 -135,653
7. @Apps 23,930,049 0 29,183
8. RockYou! 22,943,006 5,931 5,532,436
9. Research In Motion, Ltd. 22,815,107 0 253,064
10. iLike, inc 17,110,749 0 547,274

Many people compare FB with Google story, but google was different. They had just a search engine but did not depend on 3rd party to get their website attraction. And google did fast understand that they need other income sources than ads on search results. The result is that google bought over 82 companies and is investing in many news things like Tesla or offshore wind energy. Most of the investment is only possible because of their IPO. Google was profitable before but the IPO brought much more cash in.

Facebook on the other hand did need the developers. Aware of the situation they started to develop an API for other websites to connect with FB and to allow them to have a page in FB to be not anymore so dependent on applications.

However brands will eventual find ways to their consumers without FB and if there are no games anymore not much is left for users to spend so much time on Facebook.

FB has one of the biggest server farms with over 50,000 servers and a lot of knowledge of cloud computing, maybe another product could be to offer cloud computing which is not integrated into facebook.

I am not a stock broker and i don't know a lot of about the stock market but I would set FB to middle risk if they don't find new products which are outside of their portal but could utilize their big user base.

- Posted using BlogPress from my iPad.
Please visit my blog http://www.new-kid-on-the-blog.com

Location:Spinning Wheel Ln,Spring Hill,United States

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