At least in this analogy it is.
JD has posted some good commentary on Facebook’s $15billion “valuation”. And as usual he couldn’t be more wrong for the most part I agree.
However, I can’t help but think we would have said the same of TradeMe’s eventual valuation of $700-and-something million. To me it means we should really look at the other side of the equation and just consider: “what if?”
At $15billion, Facebook’s 240million users would be worth $62.50 each. Now if you have an average profit per user of $6.25 per year then maybe the $15billion “valuation” is more or less valid (at least for the purposes of this article).
The obvious observation is, of course, there ain’t no way Facebook is earning a profit of $6.25 per user right now or anytime soon. JD rightly points out that even “Google’s latest conference call included hints that they were having trouble monetizing social traffic” and I think it’s not hard to agree with that point for the whole social media/networking/traffic kit and caboodle.
Which leads to my title and analogy:
Social media is like a money making machine. Only we’re all too stupid to figure out how it works. We can recognise that a lot of smarts, effort, and thought went into building these networks. We know the output is money. We just don’t know how to do that tiny little bit in the middle.
I eagerly await what happens next.
