"Facebook makes almost no money. That's not going to change."
I doubt that you honestly believe that, but if you do -- want to make a longbet? I bet Facebook will 5x their revenues in the next 2 years. Loser pays $5,000 to a charity of the winner's choice. I'm 100% serious.
That's so unbelievably not true. Both can be difficult in their own right.
Making a lot of revenue is certainly not easy. Not a lot of business models scale up to making hundreds of millions or billions of dollars of revenue per year. Achieving that part is ridiculously difficult.
Making profit, on the other hand, is relatively simple: just control costs. We're making many millions of profit per year because we have a high profit margin. Making profit, relatively speaking, is easy.
For us to grow to hundreds of millions of dollars a year in revenue, that will be hard.
The idea behind valuing "top line" revenue is that the leverage there is unbelievable. If you increase your efficiency by 1%, you've instantly made tens of millions of dollars per year in profit. In the meantime, most companies voluntarily choose to pour all of their profits into growth, like hiring ahead of the curve.
It's only hard for you to grow to hundreds of millions of dollars in revenue because of your profit margin. Start selling stuff for a loss and you'll have tons of revenue (given that your goods are in demand and you are selling them for less than everyone else). They're are tons of businesses with plenty of revenue but shit to show for it. The auto industry comes to mind...
Facebook is not selling physical goods at a loss, and the comparison is not apt.
Facebook is making a bet that if it hires a bunch of really talented people while they are available, those people will eventually make more money for Facebook than they cost them.
Don't confuse that bet with an inability to make profit should they so choose.
I agree with the parent. Facebook recently announced Facebook Deals (which allows advertisers to advertise based on check-in triggers from facebook's location platform) and the facebook location check-in platform I'm sure will soon dwarf foursquare and gowalla combined. That combination is just as compelling if not more so to advertising as advertising when people are searching. Facebook deals could very easily be the new adsense.
Google may have a stranglehold on web advertising but Facebook is in a very good position to get a stranglehold on local advertising.
Facebook deals could very easily be the new adsense.
How? I don't have a Facebook account. I do need to search the web, though.
Google's advertising platform is strong because they put their ads where I need to be. Facebook is not as strong because I don't need to check-in with Facebook when I go somewhere. Some people think it's fun, but what I've noticed is that most people stop using Foursquare after the first week or so. Is Facebook any different?
Network effect, and not much else. They have the userbase to persuade businesses to give better deals than 4sq or Gowalla, and that will in turn entice users to use it.
Compare this to Google search ... how else are you going to
find stuff on the Internet?
A lot of interesting stuff on the internet I find in my FB news feed where my friends are posting it or liking it.
For shopping it has even more weight: I am more likely to look at what my friends recommend vs. some random stuff out of search.
I doubt that you honestly believe that, but if you do -- want to make a longbet? I bet Facebook will 5x their revenues in the next 2 years. Loser pays $5,000 to a charity of the winner's choice. I'm 100% serious.