Micahville

There have been rumors of Facebook going IPO. It posted a job for a stock administration This means that Mark Zuckerberg would make lots of money. I know this is still just a hypothetical situation as of right now, but if Facebook went public, then you know where to come before cashing in.

This led me down the path of asking myself, “Would I buy Facebook stock?” I was unsure if I would. I have made a list of three questions that you should read the answers to if you are thinking Facebook might be a good investment.

What is an IPO?

IPO stands for Initial Public Offering. When companies “go public”, they sell stock to: you guessed it, the rest of humanity outside of the company or investors.

One of the most prosperous IPO ever was Google’s. They made $2.7 billion.

Traditionally, IPO’s make people very rich. At the end of 2007, Facebook will have made $50 Million in revenue. If the projections hold true. But, no one knows for sure.

Google has been rumored to be wanting Facebook.

How does Facebook Make Money?

Facebook advertises. However, I know that many people don’t get clicks, and that the advertising is ineffectual.

I read EngTech’s post about advertising here, and another about what if Facebook’s business model doesn’t work. Here are some select bits.

Many people have said that Facebook advertising brings poor results.

Facebook is the website du jour, but in Reach Students’ experience it delivers appalling ad clickthroughs.

We’ve run four targeted campaigns this year using its flyer ads, and each time the results have been disappointing.

Our most recent campaign saw 1.4 million page impressions delivered at specific universities – and only a 0.04% clickthrough rate. Ouch.

When we first experienced poor results earlier this year we looked carefully at creative and planning. Further experimentation saw a variety of quite different offers and creative approaches. What kept us going was the fact that others had anecdotally mentioned good returns from Facebook ads.

Yet our results did not improve.

Baffled, we did some research and discovered that actually we are not alone.

ValleyWag said this:

Media buyers — the agency people who book campaigns — report that the college social network is a truly terrible target. They’re mainly students, with low disposable income, of course; but, beyond that, the users appear to be too busy leaving messages for each other to show much interest in advertising. Facebook’s members appear indifferent even to movie advertising aimed at their demographic. Clickthrough rates, the percentage of time users click on an ad, average 0.04% — just 400 clicks in every 1m views — according to one report seen by Valleywag.

Isn’t that what one would expect on a highly social site, on which people interact rather than absorb? Well, even News Corporation’s rival social network, Myspace, is a better medium for marketers: for a similar set of advertising campaigns, its click rate, a measure of the audience’s engagement, was 0.10%, more than twice Facebook’s. Complains one media buyer who spent heavily on a range of blog and social properties: “Facebook was consistently the worst performing site on just about every campaign we ever ran with them.”

Yep, MySpace is actually a better advertising medium. Ew.

If Facebook actually wants me to even look at their ads, they should customize them. I am not some robot. I am a human. I agree with Scoble.
Lastly, Does Facebook makes money by not only selling ads, but also by collecting and selling information to big companies?

I already know that Facebook tracks everything that you do on their site, and some people have mentioned that they might track like Big Brother. Their Privacy Policy is a tad scary, and I have taken a particular quease-generating summation from it. Their policy, in my opinion can be summed up with this simple statement.

By using Facebook, you are consenting to have your personal data transferred to and processed in the United States.

Signing your life away? Maybe. Although it is definitely on the creepy side.

One thing to consider before investing in Facebook would be, “Do I want to be involved with an organization that sells information with third parties?” Interested in the Facebook privacy debate? Check these links out.

What is the Facebook goal? Do people NEED Facebook?

I am asking this question because I want everybody to throw this around. Is Facebook really a sustainable business? Trying to have my questions answered only leads to more questions.

Facebook might be a fad, but I have know that Facebook is more “professional” than MySpace. Businesses and adults have become more interested in connecting, instead of using stodgy sites like LinkedIn. My father for one.

WebWorkerDaily wrote an article about this trend:

For now, with business-minded applications like Zoho coming aboard, Facebook is worth watching for those of us that rely on the ‘net for building our personal and business relationships.

Continuing on this, Facebook has the potential to become a Social OS, as characterized by GigaOM.

Maybe Facebook can do what Microsoft did to gain success: become a platform for others to build on. There is much speculation as to whether this will happen, but Facebook has the potential to become great. Some have said that Facebook is just like a replacement for Email in 2007.

In short, there are many unanswered questions that this article has left, and I hope to try to answer them later.

What Do You Think?

Do you have an opinion on Facebook? Would you invest in Facebook stock, and if so, how much would you be willing to spend? Are there any suggestions you would make about using Facebook? How do you use Facebook?

P.S. Picture Credits to GigaOM.

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"Don’t Make A Facebook Mistake: 3 Questions" was given life on on Sunday, July 15th, 2007 at 7:51 pm and, I think, categorized Web.