Will Another $200 Million Buy Facebook a Flush Future?
With a fresh $200 million in the bank, Facebook is again well positioned to avoid growing up. Rather than making money the old-fashioned way, Facebook is going for the Russian bail-out plan to again stall the inevitable: A Facebook that turns a profit, or else.
With 200 million users, Facebook has yet to prove it can do anything to monetize them. It has failed in the most basic to attract large numbers of serious advertisers--how many get-rich-quick schemes and rip-off "free" offers can any service survive?
Facebook has also failed to develop a new business model, along the line of what Google did by linking ads to content and searches, capable of supporting itself.
From a business standpoint, Silicon Valley's most-watched venture-backed startup is, well, a loser.
Companies should be standing in line to give Facebook money in exchange for access to its massive audience. However, Facebook has yet to find a way to produce big returns for them.
Facebook must face its future and develop real tools that give legitimate businesses the power to leverage the company's user community in intelligent and unobtrusive ways. That will generate revenue for both Facebook and its partners.
The company should offer robust metrics tools and smart data mining resources that make it easy to target the customers that count without spamming users who could not care less.
Even more critically, Facebook must learn to monetize its users in ways they do not find objectionable. Who would want to partner with Facebook to do something its users hate? Which so far seems to be pretty much everything that might turn a buck.
There was a time when it was assumed that if an online company could build enough of a following, that turning users into dollars would naturally follow. Facebook and other social networks, including Twitter, have proven that is not the case.
Having raised $500 million by selling a mere 5 percent of itself, Facebook is clearly the Golden Goose of social networks. Nevertheless, from a revenue standpoint so far it has only laid a very normal egg.
Maybe Facebook already knows what some suspect: That there is no easy way to monetize social network users. Perhaps it's simply cashing in by accepting large investments while the money is still there for the taking.
If Facebook cannot become a real business, it needs to cash in before people get wise and the money train rolls past.