Saturday 8 September 2012

Facebook could crumble overnight

Facebook is not like other companies that have hard assets and an established user base that will be there even when the company disappears. Facebook is not Apple nor Microsoft nor IBM nor Google nor GE nor Samsung. Those companies have hard assets and an established user base.

Just one day of bad trading, could easily set up a domino effect for more bad days with Facebook stock, and soon thereafter, it would be in its deathbed. Companies such as RIM and Nokia, would take a lot longer to dwindle down to nothing. A Microsoft or an Apple or a Google, would take a long longer, and, their death spirals would have triggered by some very huge mistakes in management.

You may like Facebook and so do many millions of people, but, what Facebook offers, is not a critical product or service that people couldn't live without, and that's what most people fail to realize. Facebook's core business is not its social networking platform. It's the sale of advertising space to advertisers. The millions of Facebook users are not Facebook's clients. The advertisers are. The social networking platform is a MEANS to gather viewers and information about those viewers so those eyeballs can be sold to advertisers. And that's where the problem lies. So far, Facebook has been good at attracting visitors, but they fail at keeping their real clients, the advertisers, happy. And a client who isn't happy is a client who won't be back and will spend his money elsewhere.

Facebook has no steady stream of income and has maneuvered itself in such a position where it has to be extremely careful about how it plans to force more ads on its visitors... or it might end up being the next MySpace.