Facebook IPO

[winner69]

From HBR so maybe an academics view but maybe FB will one day be worth not much

Is Facebook Too Big to Survive?
by Jeff Stibel *| * 9:52 AM September 5, 2012

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Back in 2007, I wrote a prediction for my book Wired for Thought that MySpace would soon be overtaken by a little known network called Facebook. Most people, including my Harvard editors, thought I was delusional. MySpace was all the rage and experts were predicting it would overtake Google, Yahoo!, the written word, even communication itself. But just like every social network before it, MySpace flamed out.

Is it Facebook's turn? Facebook went public just three months ago with an initial share price of $38. Less than two months later, it's trading for $18.75. Why is Facebook in a slump? Pundits have suggested myriad reasons including poor investor relations, lack of revenue, and expiring lockups. Last week CNN, along with a host of other sources, argued that perhaps CEO Mark Zuckerberg, the venerable prodigy who built Facebook from the ground up, isn't up to the task of managing a large public company. This week the CFO came under scrutiny from no less than Andrew Ross Sorkin of the New York Times. As tempting as it is to place blame on the business, there may be a simpler explanation as to why it's not possible to keep Facebook's valuation at $105 billion indefinitely.

My perspective is that the human brain isn't capable of utilizing a network like Facebook if it grows too large.

To understand why, let's indulge in a little brain science 101: the human brain grows rapidly in infancy, reaches a maximum weight of 1400 grams by the time we are teenagers, and then starts to actually shrink by the time we are twenty. The rapid growth of our early years helps create network connections, just like you do on Facebook. But unlike Facebook, instead of continuing to grow late in life, the brain forges higher quality connections and patterns, losing the vast majority of its early relationships. It replaces sheer quantity of neural connections with quality, making us smarter without the need for additional volume. When the brain stops growing and reaches a point of equilibrium, it gains intelligence.

Virtually all networks have similar limitations. They roughly follow the development pattern of the human brain. For social networks, quantity should only be the goal up to a state of critical mass. Then the goal must be equilibrium, or quality. We find many examples of critical mass in nature and biology. For the human brain it's 100 trillion neuron connections; anything significantly above that number creates disorder. For ant colonies, the magical number is around one million ants. After that, the colony's growth dramatically slows — or worse, the colony fails.

We don't know yet what critical mass is for a social network. We have seen many implode before — remember Classmates.com, Friendster, MySpace? Each of these hit a limit at which point the network became too big, too unwieldy and eventually shrunk into a black hole never to be seen again. At 950 million users, Facebook is clearly pushing some upward bounds.

So how do we know when a social network is getting too big? If it is not the total number of users, then could it be the number connections and friends, currently hovering around 100 billion for Facebook? The answer actually turns out to be a bit of both. For insight, we can again turn to the brain — specifically, neocortical processing (brain math) capacity. British anthropologist Robin Dunbar theorized that neocortical processing limits the number of meaningful social relationships a person can maintain. For humans, that number is estimated to be somewhere around 150. This means that it is difficult for you to maintain more than 150 relationships. So in theory, for Facebook, the maximum number of efficient connections is roughly 950 million x 150; anything greater than that will yield an inefficient network that risks implosion.

But Facebook is already well beyond that point. The average Facebook user has 229 "friends" on the site, so it stands to reason that a significant portion of these friends are not "high quality." What's the result? Getting a notification that April Ridmoore downloaded "Call Me Maybe" on Spotify. Who's April? Some girl who went out with your younger brother in high school who "poked" you last year.

To be fair, Facebook has tried to restrict the unfettered growth of its network. They make it easy to turn off notifications, and Facebook has made great strides in putting the kibosh on as many as possible. And the "random" people you encounter on Facebook are generally people you know, people you used to know, or people only one degree of separation from you (unlike MySpace in which users often received dozens of completely random friend requests per week). Essentially Facebook is a "network of networks," making it a smarter — and more successful — social network than all its predecessors.

However, it only takes a few unsolicited, valueless notifications and the utility of Facebook goes down. It is simply inefficient to spend any of your precious neocortical processing capacity finding out about the lives of people who are irrelevant to you — people who will never be one of your 150 meaningful social relationships — even if they are friends of friends.

So what do you do when you find yourself in a network that is too large? One might think the logical thing would be to cull your friends list, unsubscribe from updates, and block all app notifications. But few people do this. Instead, individuals decrease their usage and delete their accounts, ultimately looking for the next new network to hitch on to. Having reached critical mass, the network, like all social networks that came before it, implodes.

But there is an alternative. The brain, after reaching critical mass, starts to shrink. It stops adding neurons and actually loses most of its weakest connections. The brain prunes its weakest links regularly and removes errant neurons in a natural process called cellular suicide. Extraneous information is filtered out and important connections become deeper. We become wiser.

What if Facebook could become wiser? Separate out the fluff and strengthen the important relationships. Allow us to efficiently nurture and groom our packs of 150, our "real" social networks, while filtering everything not directly relevant. Facebook has made some strides on this score, but they must redouble their efforts. It is Facebook's only chance at adding value.

[Sauce]

Thanks for this Winner
Great article. I abandended a fb page under basically the exact scenario they describe. It just drove me nuts the rubbish that people kept putting on it and it was emailing me about. Especially from my more left wing friends beating on their drums
I wouldn't allow my own experience to bias my thoughts to take this article for gospel. But I think it makes a strong argument. Not that I have an interest in fb as a business so its a moot point anyway.
Regards,
Sauce

[Sauce]

abandended?

[Halebop]

abandended?

That's when the lead singer and guitarist no longer get on.

[Jay]

That's when the lead singer and guitarist no longer get on.

I like it

[winner69]

Might be 62 bucks now but these 2 dudes say Facebook gone by 2017

http://blogs.wsj.com/digits/2014/01/...ebook-decline/

A controversial research paper predicting Facebook’s imminent demise spread like an epidemic through the blogosphere Wednesday.

The paper, by two Princeton PhD students, said social media sites like Facebook usually follow the same growth and decline patterns of infectious disease outbreaks. The conclusion: The world’s largest social network will be more or less eradicated within the next three years.

The authors, Joshua Spechler and John Cannarella, cited MySpace, which peaked in 2008 and then rapidly shrunk to almost nothing by 2011.

The paper, which uses Google search query data to determine popularity, said Facebook reached its peak of popularity in 2012 and has already begun its decline. It cited a “downward trend in search frequency” since then.

A Facebook spokesman called the paper “nonsense.” Some experts also cast serious doubts.

When reached for comment, Spechler and Cannarella said they were withholding comment until their paper is peer reviewed.

While the paper’s findings have yet to be validated by other researchers, the level of chatter they provoked Wednesday underscores how under-the-microscope Facebook’s user numbers have become.

The company raised eyebrows during its earnings call in October, when Chief Financial Officer David Ebersman said younger teens were using the service less.

Overall, though, Facebook’s user numbers have been trending upward, with nearly 1.2 billion people logging in at least once a month.

Facebook’s advertising revenue has also been steadily trending north, with some analysts predicting a record $2 billion in ad revenue in the fourth quarter of 2013.

When Facebook discloses its fourth quarter earnings next week, all eyes will be on its user numbers–whether they grow and by how much.

[Valuegrowth]

Winner69 Thank you for posting above link.

After IPO Facebook’s stock began crashing and l it hit rock bottom at a price of $17.73 on September 4. Those who did some home work grabbed face book from their both hands when others tried to sell their shares. Similarly those who had face book’s shares did not panic like others. Now it is trading around $62.Those who sold face book below $20 have to pay more than $60 to buy it now. At the moment I am using face book to keep in touch with few wonderful teachers living in the USA and UK, friends and relatives etc. After reading above link I feel like doing different types of study on social networks. I use twitter and LinkedIn to keep in touch with some professional people and groups. Have a nice day!

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.

[Dej]

Whats peoples thoughts on Facebooks recent announcement to purchase Whatapp for $16 billion dollars?

http://www.reuters.com/article/2014/...A1I26B20140219

[Mista_Trix]

Wow. An unbelievable video.

Give this a watch. Looks like a lot of the ad revenue they generate is not necessarily legitimate. Very captivating watch.
http://www.youtube.com/watch?v=oVfHeWTKjag

I really don't see the model lasting if this is the reality of how it actually works, its just a massive house of cards.

[Banksie]

Interesting video Mista Trix. I don't have any experience with FB advertising so cannot comment its effectiveness. I did, however, find this rebuttal to the video and sounds just as plausible http://www.jonloomer.com/2014/02/11/...raud-response/.