a Social Network bubble?

Remember the Internet bubble? You’ll enjoy the Social Network bubble !

Let’s have a look at a few metrics of the Facebook stock market introduction.

Facebook is worth according to the markets $ 100B for 900M users so roughly $110 per user. On the other side Facebook is making $ 4B turnover so an ARPU (Average Revenue Per User) around $4.4 per year, $0.37 per month. ($4B / 900M users = $4.4 per user) This the value of 4 SMS.

One can imagine the markets love for a mobile operator with a revenue of 4SMS per month and per user.

Hence the markets are confident that Facebook can retain every customer around 25 years. (!)

If you have a look at a classic Telco business, things look a different. Let’s take the case of one of its Telco giants Orange/France Telecom group. Orange is serving 226M users worldwide (Mobile, Fixed, and DSL). It makes a turnover of € 45B with a market capitalization of € 26.7B.

  Facebook Orange
Customers / Users (M)
900 226
User valuation $ 110 € 118
ARPU $ 4.4 € 199
User payback (years) 25 0.5

One would argue that the CAPEX used for these businesses are of different scales. Facebook CAPEX is around 1B whereas Orange is investing € 18.5 B during 2011-2013 period so around € 6B a year.

Facebook CAPEX is expected to double in the coming year, so one can imagine comparable CAPEX in the midterm.

The real challenge for Facebook is now to squeeze its ecosytem to maximize its revenue. Either Facebook can increase dramatically its ARPU in the coming years or we are facing a new bubble.

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What is the value of your Facebook fan base?

Brands are fighting to get the biggest fan base on Facebook, and are investing huge marketing budget to convince consumer to join them. Expected benefits are quite simple : create more intimacy with the core customers And use them as brand ambassadors.
But how much Brands are willing to pay to acquire a Facebook fan? What is the value of a Facebook fan base ?
Here are a few examples :

facebook discount

facebook discount 2

The most admitted order of magnitude for a Facebook fan is around 1€ . A lottery with an iPad prize worth 500€ should bring around 500 fans. So your company 1M Facebook fan base is more or less a 1 M€ asset.

Facebook pushing mobile advantage foward

Analysts were thinking not long ago that Facebook should launch a mobile device decidcated to its service. Hopefuly they didn’t do this mistake and have a fairly smart approach to mobile: they are launching a java based app for low end feature phone. > Telecoms.com article

The reason is simple, in Western countries smartphone is king and people are already using Facebook on their mobile. Facebook is now focusing on were its main customer growth lies, in developping countries were feature phones are common place and smartphones still rare.

As I was mentionning in a previous post last year, the future of Facebook is mobile, everybody seems to be on the same page now.

The right question now if you are developping a website or a web service is what platform to target first, the web beeing one amongst others…

Social networking future is mobile

It is common knowledge that Facebook user number is thriving. The growth is exponential and Facebook features 430M unique visitors per month (oct. 09).

According to insidefacebook blog, France penetration rate is around 24%, that is 15M people have a Facebook account, around 40% of UK population is connected, and 8% of Germany population at this is just the beginning.

Facebook iPhone interface

Facebook iPhone interface

What raised my interest is the growth of mobile usage, the usage from mobile devices is stupendous too:

facebook mobile usage

facebook mobile usage

Twitter, the other prospering social network seems to have been designed to be used embedded within SMS. Each twitt is a 140 character message, just the right size to be within a 160 character SMS plus 10 characters for overhead.

Japanese biggest Social Network Mixi has now 16M page views per month, 75% of the views in Q3 09 were made from mobile devices.

I believe, one can expect, all Social Networks to become more and more mobile focused as mobile connections provide: ubiquity, real time, and in the near future location. The strength of this mobile wave is so strong, that Social Networks will  redefine themselves as primarily mobile players.