[jcitme]

> I think Facebook as a company is in a strong position.

Just curious, but I'd like to hear your opinion on why this is the case, vs all the naysayers that are betting against the company now. Do you have any specific point you find that Facebook can leverage to maintain success?

[pg]

I don't think they've even tried to make money yet. They've just been focusing on growth. But they have so many users now that they could do whatever they want. Ideas that would entail a chicken and egg problem for anyone starting from scratch (e.g. marketplaces) do not for them.

Plus Mark himself is such a fearsomely effective person. And so young; he's only a little older now than Larry and Sergey were when they started Google; so he still has the energy and mental flexibility that's usually the only asset of founders just starting out.

[cdixon]

Yes. Wall Street grades Facebook by drawing lines through dots of revenues and margins. The more accurate way to view Facebook is as a powerful coil that can spring in multiple directions. (I say this as someone who questions whether Facebook is a positive force on the web).

[jcampbell1]

This is a cryptic comment. Yes, Wall St views Facebook as a powerful coil, but no one knows if it is compressed or stretched, but it certainly is.

All it takes is for Facebook to go from $4 a user/yr to $8, or for teenagers to say "email me, I don't check facebook often". A powerful coil indeed.

[kamaal]

>>"email me, I don't check facebook often"

Facebook exists because I would not like 500 friends to email me every day about their photos or jokes. That sort of thing doesn't scale well with emails.

[mtkd]

Social networks exploded because they created an interaction that previously wasn't possible.

They have now become a tax on life - like email. A set of hygiene actions you have to perform every day.

Do not underestimate how much the next generation does not want to conform to the restrictions of the previous generation.

It's entirely possible future generations do not want to be tracked and targeted 24/7 - they may choose to just switch off and drop out.

50% youth unemployment in some first world countries right now. These guys may just decide to do things differently - what is social technology doing for them right now?

[sokoloff]

Helping them pass the time certainly, and perhaps helping them get laid.

You're dead right that each generation wants to be in a social space that feels "theirs", but I don't think that precludes using the same infrastructure.

When I was a teen, I drove on the same roads and used the same telco and USPS as my parents, even at my most rebellious times. In Facebook's case, each user "feels" a tiny piece of the overall universe, and one which is vastly disproportionately populated with people they've mutually selected. That, coupled with meeting jwz's use case above, makes me feel that Facebook is pretty well positioned to succeed.

[anon808]

Ahhhh yes the famous cash faucet that just needs to be turned on. Why would anyone that could have been making more money not made it before? Growth and profit are not mutually exclusive.

[staunch]

MySpace did what you suggest. They monetized heavily, harming UX, and creating space for a cleaner modern user-friendly competitor. That's part of why they failed.

I think they're just waiting until they've completely solidified their #1 position to concentrate on making more money. It will seem obvious in hindsight that they make $20+ billion, the way it does for Google now. It may never be quite as good as Google though, but max potential is especially hard to predict.

[nl]

Growth and profit are not mutually exclusive

True.

But if you are constrained by your team (ie, you can't work on everything at once, which Facebook says is their biggest constraint) and you have plenty of easy money from investors, why would you try and profit now and risk another service taking your audience when you could possibly build something that can profit for years to come?

[csarva]

Constrained by your team? I can see you making that case for Instagram with only 12 people, but according to Yahoo Finance, FB has about 3500 people. Not one of them is thinking about how to increase revenues? And they don't have enough engineers to try out some of the ideas?

[stevenj]

Do you own any Facebook stock?

[pg]

I think YC got a small amount as a result of an HR acquisition, but I'm not sure.

[pwang]

I actually think this is backwards: The primary reason why Facebook can be successful is because it is organized such that it could realize the vision of a technical founder, who has a foot in tech and a foot in business.

You're right that they haven't tried to make money yet. I once raged to a friend at Google that Facebook's use of ads displayed an utter lack of creativity or seriousness about building a business. (I also argued that Google should not try to tackle Facebook on its home turf, but if it really wanted to attack it head-on, it would need to build a destination site instead of merely "socializing" all their products. Sadly, that destination site turned out to be G+, and then they used it to socialize their products.)

There are two Facebooks. One is an identity service, built on a noisy social graph accreted over the years, which Zuckerburg is hoping to make as fundamental as DNS for the modern non-anonymized web. The other is a micro-blogging and photo sharing site on top of that identity service. Both are going to be hard to make money with.

It is really difficult to directly monetize the core identity service. They can attempt to provide the service as a bona fide piece of Internet technology (e.g. opening up retail locations to verify accounts in-person, or by partnering with wireless providers that sell their eventual phone), but then governments and others will get into the act and require open API access to the user information and graph data. As soon as that happens, they've given out their crown jewels.

Any other mechanism for monetizing the identity service is tantamount to providing advertising on the back of your driver's license, or making your social security card into a frequent-diner loyalty card. People won't like it, privacy advocates and anti-corporate doomsayers will have a field day, and governments will start interfering with their core tech. (A good strategy for Google might be to work on a stealth, open-ID based "Plan B" to have in their back pocket, for the day if/when Facebook does shoot itself in this foot like this. They've certainly screwed the privacy pooch before.)

And as for the other half of Facebook, they are in a crowded, fickle space, and their offering there isn't actually that great (and I say that as a user and a technologist). Twitter, Pinterest, and a host of small startups are very real threats. Mark paid $1B to keep Instagram from Twitter and maybe Google; how many more of those can he afford? Furthermore, Apple has enough cash in the bank to buy two Facebooks, even at its massively inflated P/E, and its gaming platform is tied to a much broader, more sustainable group of customers than Zynga's "whales". I've personally spent over $100 on iOS games - and barely noticed that that was the case. It was easy, casual, natural, and I will probably continue to dump more money into the iOS ecosystem, because it works great. I've spent exactly $1.98 to buy two Zynga games, mostly to get rid of the annoying ads, and I've stopped playing both.

Lastly, Amazon, whose customer profiles include credit cards and addresses, and whose social information is tied in to actual purchasing intent, has yet to reveal the punchline in its Kindle strategy. Just as 'selling books' was not the ultimate purpose of the company, I am fairly certain that 'reading books' is not the ultimate purpose of the Kindle. One concept: A Kindle fire with a barcode scanner turns every single aisle in every brick & mortar store in the country (with 3G signal) into a showroom for Amazon. Add passive background RFID scanning as the user walks the aisles, and it's a brave new world of retail.

TLDR: Mark is a smart and capable guy, now backed with fresh cash, but he's got to apply some creative thinking to demonstrate that he can actually milk his cash cow. His worst case scenario is to become basically Verisign, and I have not seen them demonstrate any new thinking to suggest this will not be the case.

[johncarpinelli]

FB is a strong company and they'll probably get back to a $100bn valuation in a few years. However, I don't think FB is the source of the current tech boom. It is driven by smart phones and app stores. Suddenly, there are a billion people walking around with internet tablets in their pockets. FB benefitted from this new platform just like Instagram, Dropbox, Airbnb etc.

[rehack]

But I think, its now going to be all the more tough for them to figure out how to improve their ARPU dramatically, as they don't have the benefit of obscurity.

For example, even slight change to the feeds, like inserting what vaguely seems like an Ad, raises a huge uproar from people.

In contrast Google had got Adwords figured out (but it was not as widely known) before their IPO.

[9oliYQjP]

Changes to Facebook are like fluctuations in gas prices though. People grumble and complain, then just go ahead and don't change their habit.

I'm pretty conspiracy-theorish on the whole Facebook thing. A part of me wants to believe Mark managed to hack the entire system. He got the maximum amount of money out of the IPO to build up a huge cash reserve for his company. He made his big acquisition before the IPO; future acquisitions may be harder now that the share price is what it is. But he has also sent a shock wave through the entire eco-system. If things cool off a bit, he'll be able to find more talent to work at Facebook at more reasonable prices. He won't have current employees looking to run off and start a bubbly startup. It just seems like a brilliant hack :) I'm probably reading far too much into the whole situation.

During this cooling off period, Facebook can disregard their short term share price and experiment wildly until they figure out something that works. There's not an investor alive who thinks there's anybody more capable than Mark Zuckerberg for Facebook CEO. Nobody will oust him in the short- to medium-term.

Facebook is a very much in the same position that Amazon.com was in around 2001. They have the means to figure this out. Other startups trying to follow suit don't have this luxury any more. But Facebook sure does.

EDIT: For context, this was a contrarian opinion of Amazon.com in 2001 http://money.cnn.com/magazines/fortune/fortune_archive/2001/...

[rehack]

>Changes to Facebook are like fluctuations in gas prices though. People grumble and complain, then just go ahead and don't change their habit.

IMO, its like this. We spend a lot of time here on HN. Just like a whole lot more people do on Facebook. But we come to HN for a specific purpose to engage in these kind of discussions. Just like it will be difficult for PG to convert this into something else which makes more money (PG gave the example of a market place), I think it will be no simpler for Mark Zuckerberg.

PS: This was my take on FB, before the IPO http://news.ycombinator.com/item?id=3949048

[kamaal]

FB has insane guaranteed users. Imagine a 'search the internet' or 'search videos' bar somewhere in the Facebook homepage.

Even Google knows that's dangerous.

[rehack]

One's local circle of friends on FB makes for perhaps 1%, in terms of its quality & value, of the overall number of signals(200?), that Google uses for its search.

Just like we come to HN for discussions, which our social circle on FB is not able to satisfy. Similarly, people will continue to go to the best search engine for searching for information.

Even today, if you want to get an overall sense of what people are thinking in general, you go to twitter search. Facebook you mostly search for persons, and what they are doing. It will be very difficult to change that.

PS: I realize my first para is speculative. And the rest is opinion.

[grkballer44]

FB already got their $16 billion. If your in it for the long term, uproar away that nest egg should be able to last a while. Check ins, ads, app platform, lots of monetization strategies. The only people burned are short term investors who buy in at a bad time. FB ONLY potential problem is losing RELEVANCE. You don't lose users by not monetizing mobile, but you can lose users by monetizing mobile however. Short/steady wins the race, especially with 16 billion in the bank

[kawera]

Many ebay users also use FB. And a lot of FB users use Paypal. Think about it.

Ads, movies, music, even games aren't really what will help then make huge amounts of money. Transactions will.

[rehack]

Agree transactions will make money for somebody.

Let me take just take one example of 'movies' from your sentence. Would you think of Youtube or Facebook as a natural choice for watching paid videos/movies?

Likewise, IMO, there will be specific things for specific purposes.

I will proffer that the specific purpose for FB usage are things like vanity and managing one's image (how one wants to be seen in their social circle).

Recently I am seeing some 'xyz watched some <abc video> on Social cam' kind of statuses on FB, of some xyzs who I am sure have not noticed such broadcast to their friends. These kind of mistakes, might just result in some very embarrassed and angry people.

(Am I the only one scared of clicking on anything, on any web page on the Internet, that is wrapped in 'Facebook blue' ?)

I believe the privacy concerns of these kind are going to spread to a wider base of people.

Edit: rephrase

[kamaal]

>>Recently I am seeing some 'xyz watched some <abc video> on Social cam' kind of statuses on FB, of some xyzs who I am sure have not noticed such broadcast to their friends. These kind of mistakes, might just result in some very embarrassed and angry people.

This is true. Since I observed this. I take care to log out of Gmail/Facebook/Twitter once I am done with them. And I never browse anything when I'm logged into into one of those sites.

>>Am I the only one scared of clicking on anything, on any web page on the Internet, that is wrapped in 'Facebook blue' ?

A lot of people are scared. I had to call friend to tell him personally that the <abc video> he watched that is showing up as the status might be embarrassing and he had to login and delete that from this status.

[rehack]

I don't logout, but try to open any links from within FB in 'incognito' mode.

[hackinthebochs]

>Likewise, IMO, there will be specific things for specific purposes.

It would do techies a lot of good to realize this is not true for most people. People do not have "specific sites for specific purposes". To most people the web browser is the internet. The distinction between different pages is fuzzy at best. And at this point facebook itself is the internet to a lot people. If facebook offered a compelling X experience (X can be anything here), people absolutely will use it. Do not fool yourself into thinking most internet users compartmentalize their internet usage. They absolutely do not. That is the power of facebook.

[rehack]

Replying to both your comments here.

Agree on your point that barrier to entry is higher for G+ than FB Search (if it launches).

Regarding Search: I would ask, how many people overall use Google search and how many use Facebook in the world. I would guess that the number is sort of equivalent, with google search users being slightly more than FB users.

And if that's the case, then what is to make people not use google search and shift to FB search (which is yet to be, BTW!), unless the quality is vastly superior. Which in my opinion is not an easy thing to achieve.

Also regarding any generic feature X, I doubt if people who are very new to Internet can start flashing their credit cards, if FB asks them to. Yes, they could be perhaps made to click on any thing, which again means just Ads. But, even in this, I think, we could be underestimating the intelligence of an avg. Internet user.

Also Google Adwords has a strong knowledge of user intent. And hence the Ads are useful for sellers. Over here, they are like TV Ads, but with a difference. And that difference is they can be ignored.

edit: minor rephrase

[njx]

Actually they have tried to make money. The only thing that is working for them is ad-revenue. For 8 yrs, why would anyone think they haven't tried to make money? They are running out of time before they become a penny stock. In internet years it is a long time in existence and they better have some additional revenue streams.

[sinzone]

Agreed. Facebook could do everything.

Any economical transaction involves a social transaction as well. Facebook, can be the underlying architecture of every economy.

Facebook is at the core of a large, new economic ecosystem: apps, websites, ads, mobile, causes, almost everything you can think of. They can enter in any business, and for sure they are going to expand these below, to rich an enormous amount of revenue over the next years.

Ads: I don’t know about any platform that will be able to show ads to (soon) +1B people. Their current page views is impressive, around 1 trillion/month. Ads revenue still small, compared to the amount of users they have, because the right formula to show the ads to the right people takes time to arrive at a perfect level. But when it does, it will be like a sniper, it will show a product/service you want, the moment you want. The social graph is becoming the DNA of the entire world population, it will increase its value as time passes.

Platform/Apps: They have built one of the biggest platforms with 9MM apps. Third-party apps integration and the entire FB platform is just one the most powerful things on the internet. It allowed new companies to plug into the FB community and scale a new user base quickly. FB is basically becoming an app ecosystem, maybe more powerful than Apple itself. Millions of devs are implementing their FB authentication system “FB connect”, giving FB the ability to know every detail about an app usage, the ability to gather data and visualize those data to people that matter to them. Moreover, with the new App Center they can send a big portion of traffic to various mobile app stores and take a cut out of the revenue for all those “price x install” apps: in May 2012, 90MM users were sent directly to Apple’s App Store. 7 of iOS Top 10 apps and 8 of Android Top 10 apps are integrated with Facebook. App maketing is very lucrative. The ‘LIKE” button is having a tremendous impact on media, brands and basically on the overall internet traffic; it’s a viral machine. And being able to show “events/actions” in a user timeline, is incredibly powerful; listen, watch, read, cook…can you get an idea?

Specific APIs: There is some sort of overlap between APIs and FB platform. As of today all FB APIs are free. But I don’t believe in giving for free additional value will last forever. Directly or indirectly FB will start to monetize its API calls. Directly by charging the premium usage of the Social Graph data or other specific ad-hoc new APIs and indirectly by taking a cut of the revenue that third-party developers are generating by leveraging FB APIs. The Social Graph owns more than 100 Petabytes of user data, that’s 2x the size of the entire written works of mankind. 12,8% of the world population generates real-time data, analyzed and stored by Facebook. Obviously, some APIs will remain free but the rest will be a cash machine.

Coupons/Deals: They failed here, but they will not give up. With FB Mobile, they know where you are. They can show you related deals the moment you enter in club or a grocery. A Groupon-like experience, but empowered with a more accurate location, your personal tastes and of course, friends with their recommendations. 

Facebook Credits/Payments: I believe this is going to be a tremendous revenue stream over the years. It may even surpass the Ads revenue one day. I envision a world, where every time you have to pay over the internet and offline you will have to just click a button: “Pay with Facebook Credits” from Ebay to Expedia or use your FB mobile app at the cashier. It will become the universal currency.

Much more: there are a tons of things that they can do, from user subscriptions (imagine having just 10% of the users paying $9/month to access premium services); travels, to organize weddings. But you know what? They don’t need to, there is the platform for that.

Facebook is basically becoming a new kind of telco. Facebook is speed. A new version of Facebook is released every Tuesday, there are 12,000 modifications per month, more than 1000 developers deliver code to be released each week.  Facebook average employee is 26 years-old.

FB could do everything.

[bfe]

Just for perspectives on "all the naysayers that are betting against the company", the percentage of stock on loan (e.g. for shorting) for Facebook was about 1% versus 5.3% for Zynga and 4.1% for LinkedIn as of May 23rd (the most recent I have data for) per Bloomberg.

LinkedIn for one, despite way more short-sellers than FB and despite the past month or so, still seems to be doing okay despite "all the naysayers that are betting against the company". Facebook is complicated, but undoubtedly is well-positioned for a lot of potential upside.

(Disclosure, I don't have positions in any of the companies mentioned here nor do I intend to initiate any in the next 72 hours.)

[grkballer44]

Get updated numbers, the crash the past 2 weeks have came from shorting the stock.

[alex_marchant]

I think many people misinterpret the IPO crash. It's not that the market thinks Facebook is a weak company, or in a weak position. I don't think there are many financial analysts that would say Facebook as a business is on the decline (a la RIM). The return was simply not worth the price at the previous valuation.

[philwelch]

Agreed. It's bullish on Facebook to value it at half of, say, Amazon. It's absolutely ridiculous to value it equivalently to Amazon.