Facebook or fadebook?

What's up with the Facebook mania nowadays? Is it over? Has it just started? Or is it just cruising along its path in a manner as an aircraft which cruises at a defined speed smoothly at super high altitudes?

I somehow feel that Mark Zuckerberg has played a mastergame. He waited and waited for an IPO till he was convinced that Facebook had reached a "cruising altitude" and ended up with a fortune. I seriously doubt that Facebook will cross its IPO valuation ever. Well, loads has been written about its valuation and I won't dare to compete with the finance pundits out there on whether Facebook was rightly priced or was it just a blown-up facade. I am simply trying to predict whether this engine has got what it takes to be a miracle of the sorts some of the others have experienced. Take a case for example, Google debuted in 2004 with an IPO price of $85/share and a market cap of $23 Billion. Today in a span of less than 10 years its stock price has moved to $470/share with a market cap $243 Billion. With some math, that's almost like a 10 fold increase in shareholder value within a decade.  All this while keeping its core competency permanent and dissolute. Compare this with Facebook - the social networking website debuted with a stock price of $38/share with a staggering valuation of $104 Billion in May 2012. Today as I am writing this it is struggling at three-fourths of its stock valuation with a market cap of nearly $66 Billion. This after it had crashed to almost half its value within a month of its debut. It's still early days for the social networking giant and it would be unfair to dismiss it plain and simple. But it does raises some serious questions about its future and does it have the capability to even double its market value in 10 years time let alone reaching a multiple of 10 (that's almost a trillion dollars)!!

To delve into that and being a consultant foremost, I would begin with the value addition that Facebook brings to the universe. Investopedia describes Value addition as "The enhancement a company gives its product or service before offering the product to customers". The product that facebook offers is tremendous in the sense that people can actually peek into others' lives anytime they want (I am discounting the privacy settings here :D). It has supposedly brought the world closer and more networked than ever before. People can see what their friends, relatives and acquaintances are up to, what places they have been to, what they are eating, what they are wearing and all such crazy stuff. They share their birthdays, marriages, anniversaries and celebratory events in their day-to-day lives with hundreds and hundreds of "friends" and "acquaintances". In fact, some research has even proved that the usual six degrees of separation has come down to around 3.5 with the advent of the social networking phenomenon. But before I digress, let me come down to the basic premise on which I am more concerned about- What value is it worth? Is it worth a trillion, a hundred billion, a billion? I won't go into the financial jugglery of valuation (Frankly, it's too confusing - predicting the cash flows, discounting it with some random number and on and on). I would rather like to take a more qualitative view of things that define value - availability, dependency and power. Let's start with some simple facts - Facebook today has got a subscriber base of more than a billion. It has got a reach across every advanced and reasonably advanced nations of the world (I prefer the term "reasonably advanced" instead of "emerging" simply because it gives a sense of satisfaction that the emerging nations have actually moved some rungs up in the ladder). To top it all, I believe that except for management consultants, most of the other classes of human beings on the planet spend more time on Facebook than they do on Google. So, all in all, we have got a fairly saturated user base, a fairly saturated user time span and a reasonably saturated reach. What does it leave Mr. Zuckerberg with? He simply has got no option but to offer the users more and more products to keep them hooked onto the "videogame" that he controls. Let's be frank. If you don't change/upgrade the facebook user feel and experience every once in a while, the average layman will get bored. Seriously, how long can you keep on "liking" status updates & marriage and birthday pictures of random friends? It feels good for some time. Then, we grow up !

The point is do we see enough innovations or the use of the "goldmine" that everyone claims is lying beneath the surface (customer interactions, targeted marketing, behavioral analysis, peer reviews and experiences). Right now, the answer is NO. Maybe tomorrow, there are fancy products and suits that come up which utilise the massive amounts of data that lies beneath. Compare this with Google Inc. The word has become so synonymous with search that I use it for finding almost everything. Search means Google and Google means Search. Of course, they have gone ahead and added a plethora of other products like Mail, Photos, Social Networking among others. But it operates in a no-competition zone in the search market and have not let anyone else to come even closer. Microsoft and others have been trying since the last million years but rest assured 'Bing' is as dumb as it sounds and Yahoo is dead no matter they hire an ex-googler for the top job. Such has been the dependency on the Google engine, that many an industry (Management consulting for one) would probably break down if online search is declared illegal. This brings me to the second point of discussion - how much dependent are we on Facebook or for that matter to the products which the social networking websites sell? If tomorrow, social networking is declared illegal, no industry would be so crippled or devastated that normal life would be hampered. Of course, for a day or two, I might miss seeing my friend's new car (:D) or her exotic honeymoon pictures but eventually I would come to terms with it I guess. I believe that value is inherently tied to dependency and by that metric, facebook doesn't really carry that much of a value instead.

Coming to the third aspect of valuation i.e. Power. This is surely something that facebook commands. With a billion plus "active" subscriber base, it is definitely powerful and be it mobilizing public opinion on a social cause or denouncing a bad product, facebook has become the platform of choice especially in advanced nations. The question that lurks in here is, how does it ("Facebook") take advantage of the power that it stores within to double, triple or quadruple its value? Or is it possible at all?

I would leave that to Zuckerberg and Co. to figure out. Right now, they don't seem to have the answer.