Wednesday, May 23, 2012

Don't trust any entrepreneur under 30

It all started when Wall Street created an "unlike" button for Facebook. And it may not end well.

At all.

Damn you, Mark Zuckerberg.
However, the valuation of Facebook may be moot. Because tech finance expert, Michael Wolff, presents a different doomsday scenario about Faceook in the MIT Technology Review - one where Facebook literally brings down the internet advertising model.

It all starts with the incredible growth necessary to keep Facebook stock price up, just as Aswath Damodoran assumes it must.

Woolf says that this will destabilize the ad market online, with negative results. He suggests . . .

“In its Herculean efforts to maintain its overall growth, Facebook will continue to lower its per-user revenues, which, given its vast inventory, will force the rest of the ad-driven Web to lower its costs. The low-level panic the owners of every mass-traffic website feel about the ever-downward movement of the cost of a thousand ad impressions (or CPM) is turning to dread, as some big sites observed as much as a 25 percent decrease in the last quarter, following Facebook’s own attempt to book more revenue.

You see where this is going. As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium can no longer be overlooked. The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else.”

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