Three weeks ago I witnessed a historical moment via Internet, the Facebook IPO. At that time, I forecasted that its price is over-valued at $38, I also wrote that $26 is a more reasonable price.
This morning while I was at the local cafe, Facebook fell below $26 for the first time, but by the time I met my friends at O’Burger for lunch, the price went above $26 once again. Is today a good day to own a portion of Facebook? I think so, if you are looking for some pocket money due in 3 months.
But for folks like myself who always look at the fundamentals and look into the long run, we only care about how Facebook will perform years down the road. In the next few paragraphs, I hope my insights will influence your investment decisions.
To look at the fundamentals, it means we have to put Facebook into the global, long-term perspective. To my knowledge, there are currently three players in the social “netWAR” (excuse the pun): Facebook, Twitter, LinkedIN. As much as I am a fan of Facebook, I am skeptical of its potential.
1. Services and Clients
As a service that helps people connect with one another on a daily basis, for Facebook to be an effective marketing machine, it’ll have to incorporate more details than what a regular person would share on the internet. Facebook will need to perfect its algorithm to extract information about a person’s preferences beyond what a person likes, reads, and posts. There is a huge untapped potential in what a person chat about with his friends, regular hang-out spots, daily routines, dietary habits, sleeping patterns... many of which is not usually shared, but could be extracted using advanced algorithms.
Because of the sensitivity of such information, Facebook will need to over-come regulations the same way bankers got their ways on Wall Street. This is problematic.
For Twitter and LinkedIN, they operate on a less information-sensitive platform. After all, “tweets” and resumes are meant to be shared, but not the things you chat about on the Facebook messenger.
Whereas Facebook certainly emphasizes the “social” part of social network, LinkedIN focuses more on the “network” aspect. This has huge implications for investors and analysts.
The types of ads on LinkedIN are inherently different than those on Facebook. Whereas Facebook sells a little bit of everything, from discount t-shirts to brand-name perfumes, LinkedIN offers a platform for high-end professional services such as financial, consulting, career, and planning services. If we assume the effectiveness of social marketing is the same for Facebook and LinkedIN, LinkedIN has a greater marketing potential because it has a higher per-contract value than that of Facebook; and this is simply because of the nature of goods/services advertised.
This morning while I was at the local cafe, Facebook fell below $26 for the first time, but by the time I met my friends at O’Burger for lunch, the price went above $26 once again. Is today a good day to own a portion of Facebook? I think so, if you are looking for some pocket money due in 3 months.
But for folks like myself who always look at the fundamentals and look into the long run, we only care about how Facebook will perform years down the road. In the next few paragraphs, I hope my insights will influence your investment decisions.
To look at the fundamentals, it means we have to put Facebook into the global, long-term perspective. To my knowledge, there are currently three players in the social “netWAR” (excuse the pun): Facebook, Twitter, LinkedIN. As much as I am a fan of Facebook, I am skeptical of its potential.
1. Services and Clients
As a service that helps people connect with one another on a daily basis, for Facebook to be an effective marketing machine, it’ll have to incorporate more details than what a regular person would share on the internet. Facebook will need to perfect its algorithm to extract information about a person’s preferences beyond what a person likes, reads, and posts. There is a huge untapped potential in what a person chat about with his friends, regular hang-out spots, daily routines, dietary habits, sleeping patterns... many of which is not usually shared, but could be extracted using advanced algorithms.
Because of the sensitivity of such information, Facebook will need to over-come regulations the same way bankers got their ways on Wall Street. This is problematic.
For Twitter and LinkedIN, they operate on a less information-sensitive platform. After all, “tweets” and resumes are meant to be shared, but not the things you chat about on the Facebook messenger.
Whereas Facebook certainly emphasizes the “social” part of social network, LinkedIN focuses more on the “network” aspect. This has huge implications for investors and analysts.
The types of ads on LinkedIN are inherently different than those on Facebook. Whereas Facebook sells a little bit of everything, from discount t-shirts to brand-name perfumes, LinkedIN offers a platform for high-end professional services such as financial, consulting, career, and planning services. If we assume the effectiveness of social marketing is the same for Facebook and LinkedIN, LinkedIN has a greater marketing potential because it has a higher per-contract value than that of Facebook; and this is simply because of the nature of goods/services advertised.
However, I think the real power of social network is beyond advertising; the most effective way to achieve marketing results is by harnessing the power of the masses. KONY2012 anyone?
Lately I joined Twitter (@pieconomics), and I find the Twitter to be the more powerful marketing machine.
1. Because we are dealing with non-sensitive information on Twitter, we are more likely to keep many acquaintances and strangers within our Twitter network. This makes the Twitter network more dense, thus greater information exposure.
2. Your Facebook page is a space for both you and your friends, whereas Twitter is your own space. This makes a person more likely to give updates on Twitter than Facebook, which implies that information is more recent and more frequent on Twitter.
3. With the emergence of Twitter, many celebrities and businesses have gotten on board. On Facebook, we are careful in choosing what we "like" to avoid having our newsfeed spammed by ads. On Twitter, we are less careful. This means a greater exposure to businesses, thus greater potential.
That's all the time I have, in the next part, we'll discuss the "externalities" each social network brings, and which is the most valuable.
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