The FT has run two very interesting and related stories in recent weeks. Firstly, the troubled UK media group ITV was forced to sell Friends Reunited for just £25m compared to the £170m that it had paid for the business back in 2005. A few days later the FT revealed that social network sites like Facebook and Twitter had "lost some of their cool factor with younger users". Instead they had become popular with more middle-aged users. As anecdotal evidence to support this both my wife and I just had joined Facebook a week or so before the FT ran this story and we are most certainly not cool! So what links these stories?
The connection is the way that corporate financiers value unusual and innovative businesses. Unlike more traditional companies these types of enterprises are seldom profitable so they do not lend themselves to be valued in terms of the financial models like the "dividend discount model". Instead financial analysts will look to place a value on these non-traditional companies in terms of the number of users of the sites and the potential to turn this throughput into advertising revenue. The danger is that with these sites the number of users can prove to be very fickle. So just as Friends Reunited seemed like a rising star of the online market in 2005 the outlook for the business changed a great deal by the time that ITV had to sell it for a fraction of the original purchase price. The danger now is that corporate financiers place far too high a value on the newer "social networking sites" like Facebook and Twitter. While they are much in the news now they could quickly be overtaken by the next generation of sites in the very near future.
While you think about that I must just post an update on my Facebook page. I am sure everyone is dying to hear about my recent golf round, tennis match and my latest favourite film!
Aug 26, 2009
Trying to be cool but failing very badly...
Subscribe to:
Post Comments (Atom)
Posts
1 comment:
One has to understand the mechanics of youth mentality, what is deemed as cool 1 year ago, today something cooler will come. It is the trend, there are many ways to keep up with your buddies. Therefore this market is fairly homogenous. Facebook and twitter is fair to say it has reached its full potential and trying to get 16-24 market to engage furthermore is really futile. These websites are not versatile and its target market is everyone and they originally wanted the young cool to use it more than anyone. It is really like a bull charging forward for its target, but then decides for a different angle, and ends up with no target. The best website in my opinion is YouTube. Although its similar to other websites like metacafe, the target market was everyone and all users including 3 year olds are involved although indirectly. But the problem is how does twitter and facebook remain interactive with its users. The moves at their disposal has been used perhaps it has reached its peak, but who knows and that is the beauty of technology. Moving off the target look at hotmail, e-commerce, YouTube etc no one thought thirty years ago we would live in an age which is quite easy to communicate. Therefore it is true in my opinion that Twitter and Face book are ten years late, the market was ready to be exploited and money was there to be made. Only Google and yahoo founders and other sites were clever enough to see the needs at that time and have got a loyal user base. It’s really not twitter and facebook fault they were too late.
Post a Comment