Saturday, October 16, 2010

Talking Facebook and Business - ‘The Social Network’ Captures the Facebook Obsession -

My wife, daughter and I went to see the movie "The Social Network" last weekend. It's a pretty good film - I can see why it continues to top the weekly box office figures.

The movie also got me more inspired to experiment more with Facebook (yes, I know there are already more than 500 million people on Facebook, but, hey, better late than never).

In any event, there was a good write-up in this morning's New York Times about the movie. I would agree with the columnist Joe Nocera that one of the real smart moves that Zuckerberg & Co. made was to minimize the advertising on the site in order to make it "cooler". As Mr. Nocera writes:

For me, one of the film’s great scenes comes when Mr. Saverin is trying to persuade Mr. Zuckerberg to accept more advertising for Thefacebook. Mr. Zuckerberg won’t hear of it. “I mean it is time for the Web site to generate revenue,” a frustrated Mr. Saverin says in the film.

Thefacebook is cool,” responds Mr. Zuckerberg. “If we start installing pop-ups for Mountain Dew, it’s not going to —— ”

The dialogue ends there, but you get the point. Mr. Zuckerberg was exactly right — it was Facebook’s coolness that allowed it to overtake MySpace, which had a huge head start but became less cool with every ad it took. I have no idea if that exchange between the two men took place in real life, but it is one of the truest moments in the movie. By the time Mr. Zuckerberg allowed his once-close friend to be brutally pushed out of Facebook, he had long since outgrown Mr. Saverin as a business strategist. Had Mr. Zuckerberg remained loyal to Mr. Saverin, Facebook would never have become the dominant site it is today.

Talking Business - ‘The Social Network’ Captures the Facebook Obsession -

The interesting part of all of this from an investor's point of view is that many of the companies dominating social media today are privately held: Facebook; Twitter; LinkedIn; Zinga; and Craigslist, to name a few. One of the analysts that I heard recently said that while many of these companies will eventually go public or be bought, there are too many advantages to being private and not answer to shareholders to the sites followers. In fact, this analyst said that if Google hadn't needed to monetize some of its stock to pay back some of their investors that they too would have preferred to remain private.

In short, while no one denies the incredible growth of the internet space, it's hard to find ways to invest in it.

A comic interlude: My kids have always been worried that I would jump on Facebook, so perhaps this video would have some relevance to their concerns: