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Zuckerberg heads for the iceberg

“All that bubbly good feeling that erupted through the investment markets as Zuckerberg rang the bell on Wall Street on Friday lasted as long as mid-afternoon. The big institutional investors stepped in to make sure that the stock price didn’t actually fall below the opening trade of $38 per share, costing them money just to save face.”

I wrote that sentence on Friday night, and in the days since (while this post has been in draft) the price has continued to drift down – currently touching $31 a share as I write now. (UPDATE: by 22nd August, the stock is just above $19. Wow!)

I’ve said before that the dotcom bubble is still here but FB’s feeble open day showing on the NASDAQ perhaps indicates that investors are maybe wiser than I give them credit for. Why do I think Facebook is a fail?

Taking Myspace as a template for Facebook is maybe a bit facile. The actual numbers for Facebook are phenomenal in direct comparison:

Regardless of size, there are some interesting comparisons.

For all the interest, the hundreds of millions of active users and an unparalleled depth of profiling information, FB have still not found a way to make realy money from their users. Google’s business model had money-making baked into it from the start. While their recent attempts to diversify into the social sphere have been dismal, the core operation of Google continues to print cash for the company at insanely profitable levels. Why? Because their model is, uniquely, based around intent.

A core component of Facebook’s money comes from third parties such as Zynga – whose games often encourage people to buy “Facebook credits” to access feature sets unavailable to players of the otherwise free games they offer. How are they doing through their use of the Facebook platform? Well over the first quarter of 2012, they posted a cool $85,000,000 in losses.

It’s obviously not unknown for companies in the tech sector to take a long time to reach profitability, but permissable timescales aren’t what they were. Back in the 00s with lax financial markets and phantom growth from hedge funds and CDSs swilling about, people were happy to punt on tech as a long term bet. In today’s environment of a shaky economic backdrop and advertisers looking for direct ROI from their marketing, FB as an advertising channel just doesn’t cut the mustard.

While it might be suitable for people who can afford to punt on demographics FB is an option (just as advertising during Coronation Street is) it just isn’t a viable route to market for most businesses. Partly this is because of FB’s woeful advertising. Whether it is due to the FB platform itself, or incompetent advertisers I can’t recall ever seeing an ad I wanted to click. Sorting this out has to now be Zuck’s top priority, and the only conclusion is that the user experience will start to suffer. The truth is (as GM pointed out) that a free FB page for a business is as good a channel – in fact probably better than – the advertising that FB is banking on.

So Zuckerberg, for all his Harvard smarts, is in a stupid place.

Now Facebook is half publicly owned, the pressure will start to grow on Zuck to produce the goods, money-wise. After Google floated, the pressure on them grew to do “other stuff”, which has led them into terrible decisions like Google+, while knocking on the head the science-y fun stuff they used to do. Next in line: Twitter – who surely will face pressure to float from investors looking for a return.

Facebook’s Acquisition of Instagram Confirms Dotcom Bubble Never Ended

Facebook’s $1 billion acquisition of Instagram has excited the internets. Again. I opined on this last year and I cleave to it now: the dotcom bubble still exists. As the August body of record in the UK The Metro reminded me this morning, this valuation of Instagram makes it worth more than the New York Times (I won’t link to the Metro on principle because of this, so you’ll have to make do).

A further note: Instagram has no income stream from either advertising or subscription fees and employs a total of 12 or 13 people, depending on which source you choose to believe.

In a world where financial reality is still yet to truly bite, despite 3 years of colossal warnings written in huge pink neon letters in the supplementary pages of the UK, US, Japanese and European budgets, the only industry apparently stupider than the finance industry is the tech industry.

This bubble is about 5 or 6 years overdue to pop. Catch you on the flipside when, hopefully, sanity will have come to prevail.

Don’t invest in technology

The USA narrowly avoided voting itself into financegeddon over the weekend, but nothing has changed for the World’s Sole Superpower(TM). It is still spending money at a rate vastly higher than it can generate – and seeing most of that money getting siphoned off into corporate coffers while normal people sleep in sports halls.

As yields on Spanish bonds continue to drift higher than they were before the Euro was ‘saved’ the other week, the Euro can-kicking exercise looks to be every bit as effective as trying to fend off Moth-Ra with a table spoon and a French-English phrase book. Meanwhile, the Chinese are in the grip of several unsustainable inflationary booms in their own economy and when reality dawns will have learnt that slave labour an economy maketh not.

So your technology shares are overpriced. Whenever the crash arrives, the one thing people won’t be doing is buying an iPad 3.7 or whatever generation of Android phone we’re on now. Subsequently, the value of all these hilariously pointless doodads like Foursquare and Twitter is going to sink faster than Rik Waller chained to a fridge full of lead ingots.

The upgrade cycle is going to look a LOT longer in 2013 than it does now which is going to play merry hell with whole swathes of assumption behind the price of tech shares. Watch for a new trend in downgrading as people discover that, actually, spending 40 quid every month on a phone with Angry Birds makes little sense in a world where it costs £2.80 for a packet of crisps.

The technology boom lasted from 1999-2011, which wasn’t a bad innings. Only on the other side of the crash will it be apparent which services actually added value to our lives – and the list is likely to be quite short.

 

New Look Google Account Page: More Trouble for Facebook

So Google are really ringing the changes. The new Google look and feel has arrived on the Google profile/account page. At first blush, it’s all about the shiny new corporate look, but there are a few telling additions.

Data Liberation

Google are allowing you a means to export all your stuff out of your Google account into  portable zip files. What use a ported Google Stream file is at this point is anyone’s guess – but I have an idea: more of which later.

3rd Party Integration

You’ve long been able to connect your Google profile to 3rd party accounts. It has never done anything more than put a link on your profile – and the number of accounts you can connect to is slightly limited (my erstwhile colleague Slater noted some quirks around this a while back). Nontheless, it’s got a bit of shine on it now – and Facebook is now the top choice. Again, I think there’s a reason to this.

So far so dull… but

Minor changes. But these are signs that Google are taking their bid to kill Facebook very seriously indeed. A couple of weeks back, I mentioned how Microsoft created a strategy to take down Lotus Notes way back in the Stone Age. Perhaps the most cunning part was to make it possible to import and export things into MS products from Lotus products. This lessened the fears that people had about moving platforms: that they would lose, or have to redo, a tonne of work they’d already done.

You can now export data from Google+ and Facebook. So how long before you can import? I’m prepared to bet not long at all. Critically, I’d put money on Google moving first and announcing that you can import your Facebook data – whereas Facebook will resist. Both for obvious reasons.

From a PR perspective, that will put Facebook on the back foot and they’ll have yield and give you the option to import Google+ data. While that will mean nish all to most people, it will have the critical effect of making the change seem a lot less scary than it does know – the subtext being: “You can just hop between the two accounts as easily as you like. Nothing to worry about.”

That’s a BIG barrier to adoption of Google+ taken care of right there. I was dismissive of Google+ a couple of weeks ago, and I still think that Facebook is still holding the power here, but Google is playing siege warfare here. Facebook are camped out in their hilltop fortress right now, but how they take the fight back to their besiegers is suddenly a little less clear than it was.

Google Closes Google Labs: All Your Internets Belong to Them

I’ll repeat what I said before: the new Google is all business. The announcement that Google Labs is closing  is a big fat stamp of approval on that opinion.

I think Google’s playful persona has really been more of a marketing tool than anything else for a few years. I went to the Dublin Googleplex a couple of years back and while I noted the much vaunted ‘fun rooms’ I also noted that they were entirely devoid of staff. Even back then, that struck me as a company playing lipservice to fun but where the actual culture was a whole lot more professional and business focussed.

As I noted last week, the closure of Google Health and Google Power Meter, the end of the Wonder Wheel and the new interface in general says that Google is growing up. Like any business there are bits which make money and bits which don’t. The remorseless logic of commerce says: “bin the bits that don’t”.

It’s interesting to contrast that with the likes of Groupon (“in the toilet“) and even Twitter who are still living in a dotcom, IPO mindset. Google is a proper business beholden to its shareholders, and pissing money away on fun and non-commercial frippery never plays well with investors.

Their stake in the ground is this: search and social. Google+ now looks like a lot more serious play than it did even when it launched. While other projects get the chop, someone is staking their reputation at the company that they can go toe to toe with Facebook so it’ll be interesting to see how Google’s attempt at land grab goes. While they talk it up as a serious long term investment, the clock is already ticking (and personally I don’t think it last. I will eat this blog post if I’m proven wrong).

What can we tell from this? That Google should be bracketed alongside Microsoft – if it isn’t already – as an infrastructure rather than a mere supplier. The next time they ban a site and tell you that it’s in the interests of users, don’t buy it: everything is in the interest of shareholders now – even stiffing legitimate sites to generate headlines.

You wanna play on the internet in 2011? Make friends with Google and take what they give you.

Why Google Aren’t Buying Twitter

Disclaimer: I’m no fan of Twitter

Google partnered with Twitter to bring the world real time search a couple of years back (which I slammed at the time) and that arrangement has quietly lapsed recently – which has led to speculation this week about whether the search giant is or should be opening their wallet for an acquisition.

I suspect not.

Twitter isn’t monetised. In fact, Twitter will never be monetised. For a cash rich, ever-growing company like Google, buying something like Twitter would be relatively small beer but would serve no purpose other than gaining another infrastructure to support.

And my gut says that Google know that something’s in the water. Eric Schmidt was also talking this week about whether there’s a bubble in tech – which made me chortle seeing as I made the same suggestion not 4 days ago in these pages. The fact is that the global economy is likely to undergo some colossal reverberations in the next 18 months.

Why? I’ll show you why:

Outside the tech bubble, the storms are gathering. There’s a better than 50% chance that either the US or the Eurozone is going to suffer a fiscal shock bigger than 2008 in the next 12 months – and backdraft from that will pop any number of bubbles.

While the silicon valley venture capital scene is all still about those fluttering eyelashes and exciting start-ups like Groupon (actual business value: nil) Google are playing a smarter game, IMO.

As part of their new, more corporate look, Google also binned little things like The Wonder Wheel, Google Power Meter, Google Health, Google Realtime and so on. These represented interesting projects that were effectively unmonetisable. Aside from the halo effect, they added nothing to Google’s bottom line – and the fact that they’ve been dropped tells me that Google are battening down the hatches to ride out the next couple of years of major uncertainty. There’s no way in that climate that picking up a white elephant like Twitter makes any kind of sense (I think Google+ is a kind of hedge bet: if Facebook doesn’t make it through the crash, Google has put down a marker)

And for Twitter themselves? Well their own window of opportunity to sell out narrows every day. The second crash will wipe out lots of glitteringly hyped start-ups like Foursquare and Groupon – and more importantly Twitter’s notional market value. It will survive, but will be picked up for relative peanuts as a brand acquisition somewhere down the line.

And not by Google.

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