Monday, October 13, 2008

Mark Zuckerberg's Facebook Strategy

Zuckerburg, founder of Facebook, was recently at a conference in the UK and was quoted saying that growth is Facebook's primary focus is growth, not revenue. Here's the link to the article:

I'm not sure how I feel about this strategy. Is it smart? He must know something I don't, because I don't get it. It seems that Zuckerburg is operating on one of two principles. Either he figures once he gets big enough he MUST be able to make a profit because... well... he's such a big website. I actually think this is what he's secretly hoping, but not telling anyone. More likely, he doesn't know how to make money withFacebook, but he does know how to grow Facebook, so he's focusing on what he knows. Fair enough... I guess.

The biggest problem with this stance is, of course, the money. As Facebook grows it's going to cost more and more to operate - cost he can't afford without significant revenue. The site already loads slow and, quite honestly, has enough bugs to regularly crash my browser. How does he expect to keep improving without sustained money? Maybe he's also betting that Microsoft won't let their $240 million investment go down the drain and will do what it takes to help Facebook financially.

The bigger problem for me is Zuckerburg's refusal to say he needs to face his revenue problems head on. Of course they're working on it by experimenting and acknowledging he can't just put ads on the site, but how is paying the bills not his number one priority? I guess if you're a private company you can do whatever you want...

Unfortunately, as the article describes, top people are leaving his organization and growth is slowing. Revenue, it seems, would fix these two issues. With revenue Zuckerburg can offer real incentives for people to stay and can afford to spend the money necessary to grow his site. Just think: if Facebook loaded faster because they had more servers and came out with more features because they had more engineers working for them, Facebook would continue to grow and thrive organically - exactly what he wants.

Bottom line: Growth is nice, but revenue is what sustains a business and fuels growth.

1 comment:

  1. Anonymous6:50 PM

    so what's the plan? i don't really see myself paying for fb any time soon... :)

    why hasn't fb taken off like google? are advertisements not paid for?