“Facebook reminds me of Friendster.”
“Very few teenagers are using Facebook nowadays. They are all switching to Instagram.”
“But Instagram is owned by Facebook!”
“Ahh but Instagram is not monetised yet.”
“LinkedIn just bought over Lynda! OMG think of the possibilities!”
“Isn’t Facebook coming up with a platform to compete with LinkedIn?”
“I use LinkedIn to poach staff. It is BETTER than any other job search website.”
“They are way over-valued.”
“PS 16 and PS 14.”
Damn. End of discussion. Or so I thought.
Ever since I read the news about LinkedIn buying over Lynda.com, social media companies have been on my mind. I am a big bull for online-education and the Lynda.com acquisition seemed like a shrewd, strategic move that promises so much synergy and value-creation that even Zhuge Liang would praise it to the high heavens. Also, when I say social media companies, I am actually just referring to the big 2, Facebook and LinkedIn. I have yet to use Snapchat – which all the kids seem to be using, or find value in Twitter – it feels like a marketplace with everyone talking at the same time, or determine the purpose of Instagram – I occasionally check it to see what sleazy mischief Dan Bilzerian is up to. But the one thing that often stirs up debate is whether the social media industry is here to stay.
I will speak from my perspective. (Do feel free to leave your thoughts and comments below!) I had previously not bothered with the Facebook IPO because I have seen that all the kids around me have stopped using Facebook.
“Then what are you all using now?”
“Facebook is for old people!”
I felt worried for Mark Zuckerberg. After so much blood and sweat put into starting up what seemed to be a mega-gamechanging changing company, he found that teenagers are all running over to SnapChat and Instagram. Of course, the natural reaction was to buy over these 2 companies ( SnapChat was unsuccessful; Instagram was successfully bought over), and even buy over Whatsapp to make sure Facebook exerts control over everybody in the world. Occulus Rift? Oooh Geek stuff! Bought over by Facebook too!
This fickle nature of social media companies worries me. Zuckerberg has just started monetising Facebook and then teenage users started falling. The torrid memory of Friendster resurfaces upon every investing discussion about social media. I actually liked Friendster by the way, and was sad to see it go. I truly enjoyed leaving testimonials on others walls and receiving testimonials on mine. Strangely, it disappeared within a few weeks and I can’t even remember how I started using Facebook….
Credits to memegenerator.net – Speaking of which, wth happened to Myspace???
There could be many debatable reasons to explain the demise of all the other social media companies just as there are many reasons to explain the ‘longevity’ of Facebook and LinkedIn. For Friendster, obvious finger-pointing at the management, too many cooks spoiling the broth, and ignoring painfully obvious flaws like – webpage taking too long to load while management focused their efforts on debating a partnership with AOL…many nails were hammered into the coffin and Friendster was soon put to rest. Read more about the entrepreneur nightmare story of Friendster here. *Shudder* ( I think I am going to get nightmares from reading that…)
After a heated discussion about social media and getting over the Lynda.com acquisition, I went about my usual daily routines. One day, while checking Google Analytics for site traffic to my business, I found myself staring non-stop at the visitor traffic stats to my site. My content marketing on Facebook had pulled in so many unique visitors that it puts Google Ads to shame. I shall not reveal trade secrets here but the more I studied the Google Analytics, the more I started to realise the dependency of online (and offline) businesses on Facebook and LinkedIn.
I started thinking of all the connections and networks I have made over LinkedIn and Facebook. I started thinking of all the conversations I had with people whom I reached out to and those who reached out to me. I started tracing where those conversations lead to. The results and effects have been under my nose all along! I had been blind to not realise the tremendous value these 2 social media platforms have brought to my personal life and business; the value can sometimes be quantifiable but also intangible.
Some examples: I have reached out and made friends with strangers and we made an impact over each others lives. I have received important on-the-ground market data by communicating with contacts from overseas, data that cannot be obtained from Google search or by reading newspapers or books. The newsfeed and shares have not only entertained me but also enlightened me and exposed me to articles of value that change the way I see things in life. Also, I can’t help but stress again on the invaluable network I have built from these 2 platforms.
Whenever I establish a meaningful collaboration with a stranger that promises future returns….BOOM! Facebook or LinkedIn has dropped a value-bomb. Whenever I reach out to an old friend or acquaintance and we happen to refer each other to someone else that impacts our lives – Boom! Value Bomb dropped. Whenever I face trouble and I shout for help on FB – BOOM! Value Bomb. Kind-hearted souls to the rescue. And whenever I need to do targeted marketing…these 2 platforms allows ME, to be in FULL-CONTROL, to drop that Value Bomb.
Now that I have established that my businesses have a strong dependency on social media, I try to see if others are experiencing the same. 9-5 executives do not really feel the impact. But, social-media savvy influencers and other self-made entrepreneurs can attest to the power of social media. I can understand why the 9-5vers do not see the value of social media. They have been using it more as a means of entertainment and communication… not so much for work. Entrepreneurs, business people, or marketeers, on the other hand, will always find some creative ways to hustle out whatever medium or opportunity presented to them. And the power of social media allows such people to spread influence, reach out to more like-minded individuals and establish meaningful relationships.
As a heavy social media user, what I am experiencing from utilizing these platforms is both intangible and tangible, blue-sky kind of value.
Now the question is, how do these companies EXTRACT DOLLARS from that VALUE which is provided, and pass it on to the shareholders? (Other than the obvious and boring- advertising…)
How do they make sure that the EXTRACTION of said value is Sustainable for the Long-Term?
How do they continue striving and growing and not end up in the forgotten realms of the could-have-beens like Friendster or Myspace?
How do they make sure that the fickle social media users pledge loyalty to their platform?
Is network effect even enough?
Can we even extrapolate the value experienced from users like me, onto the financial statements?
Or has this value been priced into the jaw-dropping, expensive share price?
Or is there massive value still waiting to be unlocked in the future?
Have investors, swarmed by analyst reports and bullish calls, overestimated the value of these companies?
Part 2 coming up…
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