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0 pointsjonnathanson14y ago0 comments

"implying that they could have made much more money later, or maybe implying that public perception of the stock will interfere with their ability to operate."

I'm implying both. First, if they'd have shrugged off the early pressure to take on too much VC money, they wouldn't have been propped up with an indefinite runway and would have been forced to get creative, and quickly, with monetization. They'd probably be in much stronger shape today, because they'd have had to scale up profitability in line with operating costs and userbase. (At least to some greater extent than they were).

Second, because they're now public, they're having to crash-develop profitability while still being held to the fire to make quarterly projections.

I'm aware of the apparent contradiction in what I'm saying here, i.e., does it really make a difference when their feet are or were held to the fire to grow revenue? At least in my preferred scenario, they'd have been forced to deal with it early. Before growing to 1 billion users -- all of whom expect the service to be 100% free -- and going public to the equity markets -- who expect those users to be monetized pretty much overnight.

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r00fus14y ago· 1 in thread

Not so sure that Facebook's strategy would be in-line with early monetization.

Their business strategy was clearly to rapidly gain default status and solidify the barrier to entry of being the de-facto social network... by monetizing you either piss off or scare away users, or decrease your eyeballs (that you can sell in-aggregate to advertisers).

jonnathansonOP14y ago

That's been their strategy, yes, but the problem with not finding a way to monetize as you grow -- by putting off monetization -- is that you risk pissing off users even more when you suddenly introduce it, and at such large scale as to satisfy the needs of public shareholders. It's sort of like burying a mess under the rug: it's out of sight for awhile, until it festers, rots, and really starts to stink.

Sooner or later, Facebook was always going to have to monetize. Its deliberate strategy of putting off monetization until it became a de facto standard social network was a gamble. It seemed reasonable at the time to many inside and outside of Facebook. But my point is that, knowing what it was gambling on, Facebook shouldn't have taken in so much money that it was forced to go public before its gamble was ready to pay off. Now, it's going to have to start monetizing quickly and massively, come hell or high water -- at a time when it still doesn't quite know how to do so without pissing off its userbase. It's in a worst-of-both-worlds scenario, which could have been avoided regardless of its user growth vs. monetization strategy.