After News Corp, owner of Myspace.com, announced today that they will lay off 400 workers (30% of their staff) of the popular networking website, I decided to lead my own little investigation about the Facebook/Myspace history, and I must say I found some very interesting facts.
First off, I didn’t even know that News Corp owned Myspace. By the way, News Corp is the major business that owns Fox, Fuel TV, National Geographic Channel and much more. They bought Myspace in July of 2005 (pretty much when the site was at its peak) for the “small” amount of 580 million dollars US. Way to go Tom and the Myspace team, as they say, always leave when you’re on top (with a ton of cash also)! And that’s what they did, and I think this was a super smart career decision, specially based on the fact that the web is still a domain that is in constant evolution and where trends tend to change every week.
On the other hand, I can’t say the same thing about Mark Zuckerberg, founder and owner of Facebook. Although Zuckerberg sold part of Facebook to different investors for hundreds of millions of dollars, he still, to this day, refuses to entirely sell his multi-million dollar website.
Well, let me tell you, the so-called Web 2.0 can be very surprising at times, and Facebook’s lifespan might not be as long as everyone thinks. That’s where Myspace’s announcement today becomes a huge argument. If you had asked anyone in July of 2005 where they thought Myspace would be today, June 19th 2009, most of them would have probably answered that Myspace would be hiring 400 new employees, not firing them. This is just one more proof that trends change incredibly fast in the web domain, and who knows what other, better, more-advanced networking website might pop-out any minute.
I already hear everyone saying “Yeah, but Facebook is still growing and gathering more members everyday”. True, I don’t argue with that. And that’s why I’m telling Mr. Zuckerberg, leave now while you’re on top (and with a ton of cash) !
On October 24th 2007, Microsoft acquired 1.6% of Facebook for 240 million dollars US, bringing the estimated value of the website to 15 billion. Lots of cash will you say… True, but here’s the thing. On May 26th 2009, Facebook announced it received a 200 million dollar investment from Digital Sky Technologies representing 1.96% of the company’s value, which brings it to 10 billion, a decrease of 33% in less than 2 years. Recession maybe ? I don’t think so. Take a look at these numbers.
In January 2008, Facebook announced it’s financial numbers, saying that they had a revenue of 150 million, and an EBITDA revenue of 50 million, with projected expenses of 200 million, which basically means that they’re in a 150 million dollar deficit.
The problems don’t end here. With the ever-growing number of new members every day, the number of servers to store the data is also growing. Some say they’re buying almost one NetApp per week, each costing around 2 million dollars. Plus, the electricity bill to run all this data is over 1 million dollars a month, and the bandwidth to support the site is costing over 500 000$ dollar a month. Put 750 employee-salaries on top of that, at around 10 million dollars a month. A quick math will show that Facebook is not a very profitable business right now, even with the 350 million or more that it has raised with previous deals.
If we look back at a stat I pointed earlier, if the current situation maintains and Facebook’s value decreases 33% every year-and-a-half, the company could easily be worth nickles in less than five years.
So after all that, Mr. Zuckerberg, please sell your company. I know it’s hard, but every parent has to let his child leave the house someday, and it’s better to let it leave when it’s young, healthy and hot than when it’s old, dying and ugly. It would sadden me to hear in a couple of years that one guy, once worth billions of dollars, sold his website for 50 000$ and now has a movie being made on his zero-to-hero-to-zero life story.