As I sit on Southwest Airlines heading to Portland, reading the NY Times about how Facebook is reporting loses and has lost close to 50% of value since going public, I have to laugh. My blog from last year seems to be validated by today’s events. I never understood how Facebook could monetize sufficiently to justify the valuations. Popularity and consumer usage numbers do not necessarily translate into wealth creation. Necessary but not sufficient is appropriate here. Is it another example of “Geek Dom” interfering with management acumen? Is it the VC mantra of “Just get visitors!” or a lack of focus on value propositions that can be turned into sustainable revenue? I think it is equivalent to the practice of building a shopping mall, filling it with stores and then expecting people to naturally buy. Seen any shopping malls without tenants? I have. No one is suggesting that Facebook is not making or can not continue to make money. They might even pull a Jeff Bezos and hit it out of the park (after being in the same predicament). But Facebook being able to support the Wall Street valuations? I don’t think so. And I still maintain that the repeated security and personal privacy violations Facebook has perpetrated on their CUSTOMERS will send those same customers fleeing the first chance they get. Rather than putting money down on Facebook, put it down on the start-up application that figures out how to easily and automatically switch your content to another platform.
So what does this all mean to the average start-up trying to make it big in the world. Her are some suggestions:
1. Spend as much time on evaluating your business model as you spend on creating a user experience.
2. Respect the needs and desires of your customers; playing tricks on them by manipulating their data might attract capital but will drive these same customer away…eventually.
3. Remember the old saying: if you have to continue to deal with someone over the long term (i.e., your customer) you simply must create a win-win scenario. Setting up a winner take all proposition only works in poker
4. Propriatary virtual environments like Microsoft, Facebook and Google strengthen the need for alternatives; Mosaic?