Facebook: dot.com bubble, 2.0

As Facebook prepares for their IPO, Business Week points out that they have a very meagre profit profile.

There’s no question Facebook is huge—possibly the largest digital-only social enterprise that has ever existed—and it’s still growing at a fairly rapid rate. Just a few months ago it crossed the 800-million-user mark, and it has now passed 900 million, which suggests it will probably rack up a billion active users sometime later this year. And more than half of that user base visits the site at least once a day, a level of engagement other Web services would likely kill for. [. . . .] Facebook’s problem is somewhat different: It has nearly a billion active users, but it makes a remarkably tiny amount from each one—about $5 per year. That’s not a lot, considering over half of those users visit every day. And while the amount Facebook makes from the average user rose in the most recent quarter, it grew just 6 percent. Some of the marketing costs the company is racking up are no doubt increasing that number. But how much more can Facebook squeeze out of its existing user base?

Much of the focus on the company is on its incredible number of dedicated users – which should be Web 2.0 manna. But unless the goal is to have all 6-7 billion people on the planet on Facebook, there is only so much further they can grow in that direction.  The question is how much of that dedicated user base is due to the relatively uncommercial skin of the platform?  As they try to monetize it with more ads or deeper data collection and sharing, will people run away?

This is a very specific question about Facebook, but it speaks to the general anxiety of our age: as culture can be more freely distributed and shared – arts, music, movies, education, and news – how do we develop the structures to support those activities in a sustainable way?  In this sense, there is a very fine line between micro-level hypercapitalism and no capitalism at all, at least in terms of supporting cultural production through its commodification.  We may soon have to answer some difficult questions about what kind of work we would like to support and foster as a society – and how.

Meanwhile, please share this post on Facebook.  We don’t get any money from the site, but it is always gratifying to see those pageview stats.

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