Everyone assumes that if Facebook ever sells, it would be to a company like Viacom, News Corp. or the like. Of course, this does not mean that only old media would be interested, since it’s conceivable that most new media firms would love to have their hands on a site like Facebook.
I just posted something about Facebook reaching 85% of college students. As such, all companies would want to own Facebook, cause it’s easier to acquire a user in a relatively early stage of their consumer life cycle… If you are Gillette and can win over an 18 year old, you are set for life. That’s a lot of razors and cream over a lifetime. Lose out Schick and you will spend quite a bit in marketing dollars to try to steal that client.
But after posting that post about Facebook’s reach amongst students, I then read another article bashing Google for failing to “kill” with their killer applications: arguing that:
Perhaps Checkout will be a big hit, but the fact remains that for all the attention that Google’s product launches get, they haven’t been very meaningful for investors, nor have they shaken up the online landscape as it had been assumed they would. Google Base didn’t kill Craigslist; Google Finance didn’t kill Yahoo Finance; and Google Spreadsheets hasn’t killed Microsoft’s Excel. The list goes on, and even though Google often claims it isn’t trying to “kill” anything, why should the company bother entering these markets if it isn’t going to put pressure on competitors?
Allow me to state that I am not a fan or a critic of Google, I just think they’re a great case study in business. Everything from how the two founders met and didn’t initially like one another, to how they stuck to their guns in search, to how they got two competing VCs to invest, to how they managed Yahoo! to use their search after Yahoo! didn’t want to license their product originally, and of course, to crushing everyone in search when people thought search was dead.
Point is, five years ago, Google’s revenue was probably $0. In fact, until they basically stole Goto / Overture’s cost per click model, they had no idea how to generate revenue. But in less than five years, they went from $0 revenues to $6 billion. They are on pace to generate $10 billion very soon, meaning that they will make more money than most media or tech companies do. And, since most of what they do is automates, they have margins that are the source of envy in the industry.
That’s why people bash Google. I did not buy any of their stock because I didn’t have much funds at the IPO date, and I never did because the stock is expensive to me, I own shares in their competitors like Yahoo! and MSFT because these seem cheap relative to Google and mainly because they are far more diversified.
Which gets me to my point: Google knows that it needs to diversify, so it is growing in many directions, including taking on eBay, Craigslist, MSFT etc. But it knows that those companies have focused on their core and will not be “killed” overnight, hence why Google does not come out and say “we’re here to killl competitor X.” More power to them for showing some class in a time and age where most business people and business organizations lack it big time.
What Google realizes is that it really needs 1 out of all of their Google Labs ideas to take off. If Google’s Ad Sense - the magical search ads that generate 99% of their revenue - took less than 5 years to blow up and vault Google’s market cap to $120 billion, then all they need is for 1 or 2 of those ideas to develop or for 1 to blow up. Trust me, the same people who bash Google will love them.
So, let’s connect the dots (can’t I ever be brief?): what Google is doing is slowly but surely changing people’s consumer habits. I am 28, I am used to load up Excel when I need a spreadsheet program. But, I also use email far more than instant messaging (IM). And I rarely text message people with my PDA/Cell. Yet, those under 25 probably use IM a lot more than I do, they also text message one another a lot more… and by that same extension, they might grow up not loading up Excel but rather using Google Spreadsheets.
So you see where I am going with this.
If Google wants to accelerate the change in consumer habits: you know, instead of going to Craigslist, you go to Google Base, instead of paying with Paypal, they use Checkout, and yep, instead of using MSFT Office, you load up Writely and Google Spreadsheets, then it might be interested in acquiring Facebook, since 85% reach amongst college students will put it and its products smack in front of the next generation of business leaders, consumers and what not and increase the likelihood of turning its new products into killer applications.
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July 28th, 2006 at 4:50 pm
[…] Google’s increasing difficulty to surpass investors’ expectations - read. Yahoo’s Google Envy - read. Google shouldn’t attacking Microsoft’s monopolistic ways - read. How Google could compete in online audience measurement through its search data and Google Analytics - read. eBay blocklisting Google checkout smacks of hypocricy - read. Should Google buy Facebook? - read. Google/Yahoo! merger/acquisition more likely than MSFT/Yahoo acquisition - read. Adobe partners with Google in an anti-MSFT move - read. Does Google dominance scare News Corp.’s FIM from launching search engine? - read. Google’s incoming PR nightmare - closer than it might appear - read. Will Google be the 21st century’s version of MSFT-esque monopoly? - read. […]
August 17th, 2006 at 3:12 pm
[…] Today I read on CNET that Facebook will be launching / has launched a bill sharing application. As you know, Google launched it payment system a few weeks ago. I wrote (probably not the only one, mind you) that Google might be interested in buying Facebook because it might give it an egde in changing consumer’s habits over the next decade; after all, Google wants to be the gateway - or window to the Web, PCs, laptops and cell phones. And tomorrow’s generation is on Facebook. At least the next generation of Americans. […]