Yes and no for both. If we think in investment terms, say price/sales , (25x for FB and 19x LNKDvs. 2X amazon and 3x Google) or apply a DCF analysis they certainly look ahead of themselves and the monetization per registered user or MUA (member user activity) confirms this also. Analysts unanimously point out the monetization challenges for both companies and if governments continue to inflate there is an increasing probability that we will see a recession with double digit inflation, placing even greater pressure in their advertising revenue streams.
So how can FB and LNKD improve their monetization models? Answer: time.
Money and time are linked because they are both quantifiable. Time-management is more important than money-management. We can always hustle up more money. We can trade our time for more money. Only rarely can we trade our money for more time, which is why rich people die only slightly older on average than poor people do in the same society. There is no book out there that i know of that can help you manage your time. Time management is really closer to budgeting, it is you that ultimately allocate the daily time. Successful people understand the importance of time and have self-discipline allocating it.
I don’t have a Facebook account because i regard it as mostly a waste of my personal time with a bounty of interruptions with mostly narcissist content. I do have a family account to keep a record on my daughter’s growing adventures and to touch base with close friends that are also parents and relatives. My wife mostly does the updating although she has decreased the time allocation on it because she came to the same realization that i did; it is our best interest to convert waste of time activities into investment of time activities.
If Facebook and Linkedin would have this approach more money will come to them and to you.
Here are some waste of time (WOT) examples:
1. TV and daily news
5. Worrying about things you cannot control
6. Over certification
7. Networking with people you have nothing to offer them
8. Conventional experimentation
9. Narcissist related activities
Investment of time (IOT) examples:
2. Time with Family (Facebook helps a bit here)
3. Building relationships (LNKD and FB help a bit here also)
5. Anticipating the next day
6. Development of practical skills
7. Networking with people you have something to offer
8. Unconventional experimentation
9. Goal oriented activities
If you wonder who you should connect with or network out to, the answer is people that have a higher IOT than a WOT.
Why invest in FB and LNKD stock now, wouldn’t be better to keep an eye on where do Zuckerberg and Reid Hoffman place their moneys with the bounty proceeds they received?. If FB and LNKD would reinvest their newfound treasure in approaches that make people save time and help allocate it/invest it, it would be wiser, it will be valuable to you and me and I personally would give them both my hard earned money. Unfortunately history tells us this is unlikely, it contradicts their monetization models. The overwhelming tendency would be to gobble up lesser competitors paying Premium prices for them and become another too big to fail.
Most of the jargon is that these companies are “players”, according to Game Theory the winner is the one that remains flexible, a formless player that gives away no tendency. In this game their architecture has been laid out and competitors are out there working on the next big thing. Eight years ago there was no FB, or LNKD or YouTube, what makes us so risk tolerant that a new offer wouldn’t be out there to take a piece of their forward untapped market before they can capitalize on them ergo justify their lofty valuations? Still, as of today knowing not more than this I do believe FB and LNKD have note even begun to start monetizing their respective platforms. Keep reading on the why is this.
What would be your personal cost if FB or LNKD would be gone tomorrow or in a foreseeable future? The cost to relocate you and all your gang is high. By you and me building our social and professional networks in their platform we are trapped. The familiarity has a Price and a cost, the learning curve also, but still both platforms have holes in their armor even as the ever-attractive new social-commercial boundaries have become intertwined. As the late Steve Jobs used to say, there is unforeseen hidden value when worlds meet. We are just starting and the decreasing the cost of these technologies make their respective markets wider, so the tendency is to increase their gravitational pull and grow ever bigger. If you think like a contrarian then you are a thinker, as decentralization is key to innovation.
So what is the real value of FB and LNKD? Their real value is that they organize the web, they facilitate aggregation. Zuckerberg and Hoffman both saw value where others saw waste, by offering a virtual electrical current that you and I could produce from their respective platforms and reverse entropy happened, voila! Aggregation. For holes in their armor keep reading.
There is value in converting waste time into investing time, you become more productive, productivity gains being the best way to build wealth and self-discipline to achieve it, is the most crucial factor in success. If fixation continues with their current strategies they themselves will become the bottleneck, more glut, as time spent with no tangible results for the majority of people that are not aware of the value of their time being spent become evident. Time allocation is a problem for most people, we live in an era of “free time”, and youth will be hit the hardest in recessionary environments, so advantage here to LNKD.
There is a dot in their architecture that they have passed on, in hard time community becomes a safety net. FB and LNKD are not community platforms for two reasons; people within your profiles cannot communicate freely witheachother, you are the bottleneck and second there is no chance for people to influence the environment. If the member perceives no chance to influence their environment it will not participate, it will not difficult to engage and less probable to persuade him to buy anything. Fewer sales, less revenues, less relevancy.
The upcoming economic environment provides an opportunity, the best business will be the survival business and time allocation with self-discipline will be keys to solving the individual problems, to pull out, the individual will need help, the group, and the community. The next best thing for the upcoming economic challenges would be to facilitate the individual’s virtual community environment and FB/LNKD do not, as controls and fixations are a bottleneck.
As the global economy goes into recession, unemployed youth will have more idle time , this means more web time, more registers, more people looking for work, these benefits both companies but no money to show for it unless they remove themselves as potential bottlenecks and there is always the government intervention factor lurking in. Less is more. Don’t waste your time, invest it.