Facebook: Zuckerberg’s Unanswered Questions
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“We don’t build services to make money; we make money to build great services.”
In that one sentence, CEO and Founder Mark Zuckerberg summed up why Facebook (NASDAQ: FB) will never achieve the profit investors expect. I listened to the entire TechCrunch Disrupt interview with interest, and a brief summary of Mr. Zuckerberg’s thoughts and answers to some very important questions and concerns are summarized below.
What is Facebook’s Long-Term Vision?
In three to five years Facebook wants every person able to connect with anyone worldwide. In reality, Mr. Zuckerberg believes that Facebook’s long-term success depends on how well the company does with mobile.
What New Business Opportunities Will Facebook Pursue?
At present, about one billion searches are conducted daily on Facebook and Mr. Zuckerberg has a team working on developing and refining Facebook’s search capabilities. Rather than copy Google’s (NASDAQ: GOOG) method of returning responses that might fit, Mr. Zuckerberg wants answers to be user specific. For example, a Facebook user could type in the question ‘What’s the name of the Italian restaurant my friend so-and-so ate at last week and what did they have?’ and get the specific answer. If successful, Facebook’s new search method could replace Google as the top search engine provider. On the other hand, Mr. Zuckerberg did stress several times that a Facebook phone was definitely not in the works.
How Will Facebook Monetize Their Mobile Ad Business?
For mobile advertising to be effective, they must be fundamentally integrated into the product. Ads must target Facebook user interests to increase the chance of the user clicking and buying. Mr. Zuckerberg explained that more Facebook members are using mobile to access their account and are spending more time on Facebook daily as compared to PC users. Ultimately, Facebook’s revenue depends on how well the company does with mobile.
How Will The Instagram Purchase Help Facebook?
Mr. Zuckerberg waxed enthusiastically about Instagram’s program of allowing users to take photos, apply a variety of digital filters and immediately upload them to social networks. As a free photo sharing and social media site, it instantly fit with Facebook’s platform. Mr. Zuckerberg reiterated his previous statement that he was "committed to building and growing Instagram independently."
How Do Facebook Employees Feel About the Low Stock Price?
“What really motivates people at Facebook is building things that they’re proud of.” Mr. Zuckerberg believes Facebook employees see money as a secondary issue compared to the satisfaction they get from doing something they love. Facebook’s low stock price means employees can “double up” and receive additional shares to make up for the drop in price.
What Would Facebook Like to Do in the Future?
With over 235 million users playing games on the site monthly, Mr. Zuckerberg would like to further develop the gaming platform and work with new providers. Zynga (NASDAQ: ZNGA) has lost members due to Facebook internal changes, and Mr. Zuckerberg avoided comment regarding the current relationship between Facebook and Zynga.
Other Thoughts.
During the interview, Mr. Zuckerberg stated that Facebook's product design group has become decentralized, and all code is written for mobile. The company is concentrating on developing three platforms: mobile web, iOS, and ad integration.
Mr. Zuckerberg expounded on a variety of Facebook topics enthusiastically and intelligently but failed to address some very important questions. Since Facebook users don’t use the site to shop, how will the company convince users to click on ads and purchase goods so as not to lose advertising income? How will Facebook control their costs as the company tries to grow and regain their IPO market cap? What can Facebook do to recruit new users and convince their inactive members to begin using the site again? And lastly, should investors interpret Peter Thiel’s stock sale as a sign of unrevealed internal weakness in the company?
Facebook stock is up over a dollar today in response to an interview that reassured investors that CEO Zuckerberg was still at the helm. But once this temporary euphoria wears off, the same questions that have nagged at investors remain unanswered.
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