I got an email from my chief executive the other day. Nothing unusual in
that, you might think, but then I’m not a finance director so the number of
times I receive an email from the CEO can be counted on, well, including this
particular incident, one hand.
Unfortunately, it wasn’t an invitation to discuss the company’s M&A
strategy with our investment bankers. Nor was I offered the opportunity to talk
through my promotion prospects while enjoying a round of golf at Wentworth. In
fact, I was soon brought down to earth with the realisation that it was a
blanket email to all staff. Nevertheless, it offered interesting reading.
Without wanting to divulge too many corporate secrets, the email explained
how a small percentage of staff were logging onto social networking site
Facebook during work hours and, one would assume, spending vast amounts of time
buying virtual pints of beer for virtual friends on company time.
For the dinosaurs out there not familiar with Facebook, let me explain. Upon
joining, (which I have) you immediately try and locate as many of your friends
and colleagues as possible and ask them to be your Facebook friend. It soon
descends into a bizarre cyber-popularity contest (at the last count I’d amassed
72 friends and an unhealthy jealousy of a former colleague who was well on the
way to his double-century). You will then get an even more bizarre urge to look
through the holiday snaps of a school friend you haven’t seen for the best part
of 20 years (Morocco in September looks lovely, by the way). Before you know it,
a vast amount of your real life has been wasted with nothing to show for it but
a few virtual pints, 121 zombie points (whatever they might be) and yet another
password to remember.
Having joined the site about six months ago, I can categorically confirm that
the Facebook phenomenon does nothing to improve your quality of life and, as far
as I can tell, offers applications only in complete contrast to the world of
business. In fact, all it does do is provide another method for people not to
get in touch with friends and acquaintances they really would get in touch with,
if only they had the time.
So you can imagine how surprised I was to learn that Microsoft had spent
$240m on a 1.6% stake in the company (that decimal point is in the right place,
in case you were wondering). While undoubtedly a finger-in-the-air valuation,
one can’t help but wonder exactly what assets Facebook has that makes it worth
$15bn approximately the market cap of newly-merged Alliance-Boots.
So, to help, some stats. Facebook has around 55 million active members who,
between them, upload more than 14 million photos each day. An average of 250,000
new users register every 24 hours. Its chief financial officer, one Gideon Yu,
is already a rich man having earned squillions of dollars as the CFO of YouTube
when it was sold to Google for $1.7bn in 2006. It has around 350 employees and
revenues in the region of $100m. It receives more than 65 billion page views per
month. You are guaranteed to suffer a bout of depression upon visiting the
company’s executive profile page and discovering that their combined age is
probably less than that of your car.
Joking aside, however, if there’s one thing the Facebook phenomenon does do,
it’s to highlight in bright, six-foot-high neon letters the potential
dangers of the e-conomy. We’ll probably never know how Microsoft came up with a
valuation of $15bn for what, in reality, is nothing more than a few carefully
crafted ones and zeros. But then investors haven’t exactly shied away from the
complex array of ones and zeros that makes up Google, itself boasting a market
cap that tops £200bn. Both companies, while undoubted darlings of the e-conomy,
are also frighteningly exposed to the moods of their users.
The thing is, I know I’m not alone in my frustration with all things
Facebook. I’m fed up with super-wall posts, have no idea what a zombie is and,
frankly, don’t see the point in a virtual pint of beer it’s even worse than
alcohol-free beer, and that’s saying something.
The danger for those youthful Facebook executives is that I could soon be
joined by a swelling tide of disgruntled former Facebookers. For the company, it
couldn’t get any worse than that. They are, after all, dependent on the whims of
a notoriously fickle population. Who can say that chief executives won’t be
circulating emails expressing their concern over the excessive use, on company
time, of the next big e-phenomenon?
Maybe I’ve missed the point entirely, but to me Facebook was a fad. And while
fads can certainly be expensive, time-consuming and horribly addictive, they
rarely return long-term shareholder value. Especially when they are valued at
150 times revenues.