Facebook’s Value Continued
This is a continuation of an entry I wrote 3 months ago since the issue has become pertinent now that Facebook is doing their IPO.
The question is… Does Facebook have value? It does if they are innovative enough. The endgame isn’t the silly little ads on the side of the screen. The end game is monetizing their information to lure big corporations to pay them to better understand the consumers and public at large.
If you know how educated rich people (comparatively speaking) behave in all aspects of their life, you can tailor everything to maximizing profit out of those people. This isn’t an issue of just disposable income and some ads on Facebook’s website. The value is that they have information on how you interact with everyone, everywhere. How much is spent on marketing research each year? How much is spent on polling data each year? This in depth information is useful to a lot of people. Think of Facebook as the world’s most knowledgeable consultant.
It’s not the social network they are selling. With enough information, you can not only know what people view as necessities, but how to manipulate people into changing their beliefs what is a necessity and what isn’t. Understanding what people want, what people need, changing what they think they want, and changing what they think they need have been tools utilized successfully by every great emperor, tyrant, and monarch in history. It’s about manipulating the masses.
Look at anything that gets popular. You know why it gets popular. You know when it gets popular. You might even know exactly who it is most popular with. Facebook, if it has data mined to the level I think it has, knows almost every single input of how. When you know “how”, you can be a puppet master.
This saves corporations money from the not only the advertising standpoint, but research and development. If you know what people want, you’ll make less of what they don’t want. Society generally moves in mass, so if you can accurately predict and understand the movement of the masses and how the educated and richest affect the move you can profit from it. From Zuckerberg’s end, the goal is to create even more products within the Facebook landscape especially in the mobile end. People can act like it’s impossible, but it only takes one smart person to blow some societal assumption to smithereens.
Do you believe investing in education? If so, from that alone, you can invest in Facebook’s staff and brain power. It’s not a sure shot commodities investment but the payout could be better.The problem with evaluating information based companies is that people don’t think about how different the cash conversion cycle is from companies that sell products. There’s less overhead in raw materials. There’s less overhead in actual manufacturing. The gestation period in the cycle instead of being days could be months or years, but when it comes to sales, if it hits big, it’s huge.
If you balance your portfolio, you can afford a risk on Facebook. There’s a reason why people diversify their portfolios and keep a mix of assets based on their needs and risk level. If you think too hard about just the value of one thing and over invest in it, you’re going to lose no matter how stable it is. Home prices went up every single year from WWII until 2008. Mortgage backed securities were stable and consistent for several decades. Suddenly, Wall St. over invested in a single type of asset into the trillions and it killed the market. JP Morgan can lose Facebook’s $100b in 50 trades.
People can bash Facebook all they want about it being a dying website. Sure, it might die like everything else does, but with the amount of money they will create, they could easily morph into a conglomerate that doesn’t even remotely resemble a mere tech company. Can you explain to me why Mitsubishi is stockpiling Atlantic bluefin tuna and waiting for that species to go extinct? Oh that’s right… because they’re absurdly reach, absurdly diverse, and are plotting ways to make money even if it means hedging bets against an animal’s extinction.
Look at the history of Procter and Gamble (soap and candles), 3M (mining), Dupont (gunpowder), Disney (silent era cartoons), General Mills (power leasing to manufacturers), GE (mostly lighting), etc. The tentacles of some companies after they got cash reach places you would have never seen. If Facebook isn’t stupid, they’ll make money with money. MySpace died because it didn’t diversify and had an uneducated poor base. Instead of being bought… Facebook is creating cash… this makes them well… dangerous.