Friday, May 18, 2012

Facebook and the Value Proposition

When looking at any business opportunity one looks at how value is created and how the company can monetize this value. Value is relative to the user. For example, Microsoft had substantial value creating capacity, and yes it cost to attain it. It was the word processor, spread sheet, and to some degree the operating system. Google had substantial value. It allowed access to information and it created and environment to share it and to monetize it via advertising.

I was a very early Facebook user at MIT, students drove the use. I have not used it for two years. It has no value and in fact it has a negative value. Why? Because it allows somewhat crazy comments from those to whom I was linked to create my profile. It had negative value. It also lacked privacy from my perspective. Thus I left.

So when looking at Facebook I see another AOL. And why AOL, because when in the mid 1990s while teaching at Columbia Business School I did a case on AOL and stated that in my analysis at the time it was at best declining in value. That was before the Time Warner acquisition. I see possibly the same here with Facebook. Yes it is a "social media" and yes it facilitates such communications. But is it of singular value to a person, a company? Time will tell.