Facebook and the Naked Samwer Brothers
Reports that the Samwer brothers have taken an undisclosed stake in Facebook have got the population of the entire world wondering what it is they know that the rest of us don’t. This may be a gross exaggeration on my part, maybe its just me wondering and everyone else can see it. But as a true non-believer - someone who just does not get Facebook - it looks like the ‘Emperor’s New Clothes’ to me - a duff investment following hot on the heels of Microsoft.
Some may argue that its a case of too much money on the part of Alexander, Oliver and Marc? Others may say that their investments in LinkedIn, HomeAway, ReachLocal and MFG.com doesn’t occupy enough of their time? Or maybe they are dabbling in a little spread betting? Or perhaps they are gathering knowledge for future investments? I guess we may never know what they were thinking. However one thing I am sure we could all agree on is that the brothers will have to wait a long, long time to get their money back - if they ever do.
I happen to believe that the business model for Facebook in its current form is fundamentally flawed. Whilst advertising offers some comfort to investors, it will only exist in any meaningful amounts while they continue to attract sufficient user volumes. This is by no means certain as they are largely dependent on trinkets and toys to maintain user loyalty. Widgets are merely a temporary distraction - a rattle to a baby. Just as flared trousers, beedly-boppers, and The Osmonds have all faded into history, in time Facebook users will tire of the rubbish offending their eyes and hop to the next fad-site. And as users first peak and then fall, advertising revenue will follow. With less revenue coming in, Facebook will then be under pressure to attract new users - but how?
So what is it that the Samwer brothers know that makes this death-spiral of a business worthy of their investment? After all they are smart guys. What strategy could Facebook possibly be planning to adopt to secure its future? Well the answer (at least in my view) is not really that astounding or new. In an online business world that exists almost entirely on eyeballs, the secret to success is …. content. There now, I have said it. The ‘C’ word. Sure it’s obvious, but what content and how?
Social Network rivals MySpace are planning their comeback with a combination of co-production of ‘webisodes’, working with the legendary film studio, Hammer Films. Bebo is attracting content from over 60 sources including the likes of MTV and the BBC through their Open Media offering - basically content owners get to keep all the ad revenues generated around the content they post. Media companies are not only beginning to get Web2.0, they are beginning to love it. Their blended distribution approach, using multiple platforms to release film shorts that serve to attract advertising revenue and strengthen the channel or content brand, is beginning to reap rewards with online audiences growing by the day.
In a search for content Facebook will find a willing media community and at the moment has the momentum. So my bet is that it will soon announce that it is using the investment to beef up its video content position. Either that or the Samwer brothers will look naked.
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