Monday, August 06, 2012

Facebook as a Utility vs. Facebook as a Business

The article titled “Why Wall Street Likes LinkedIn More Than Facebook” discusses the factors behind the varying post-IPO results of both companies.
LinkedIn is currently trading at twice its IPO price, while Facebook is trading at 53% of its IPO price.  LinkedIn brings in about $1.30 per user hour spent on the site, while Facebook generates 6.2 cents per user hour.  Of the two sites, LinkedIn is (arguably) viewed as less engaging while Facebook is perceived as exciting and fresh. 
The author argues that the professional details contained in LinkedIn are more valuable to Wall Street than the social data included on Facebook.  He cites recency, authenticity and standardization of the sites as factors that lead to this conclusion. (The article explicitly details each of these factors.)  Additionally, LinkedIn sells a product, LinkedIn Recruiter, at a high price point.
At its core, Facebook is a tool that allows its users to connect to each other digitally – and at the social level.  It is a utility.  As such, it is a completely different animal than the professional LinkedIn site, which is at its core an enterprise.  However, it seems doubtful that such comparisons of the two companies will cease.  Will Facebook ultimately have to change its core competency in order for it to gain Wall Street’s favor?    

1 comment:

Unknown said...

I think that these types of comparisons are interesting. For example, let’s say Facebook is a Hummer and LinkedIn is a Mini Cooper. The article presented in Forbes paints the picture of the power of a network being rooted in its utility and understandability. Therefore, to extend the analogy further LinkedIn is a Mini Cooper in New York City vs. Facebook a Hummer in a city where smaller vehicle size is better. The argument that I would make here is that no one (potentially not even Facebook) has really figured out what its ecosystem really looks like. More importantly in what ecosystem would the Hummer thrive? What it all boils down to is can Facebook define its self in a space and a manner that we all understand (e.g., I want to get a job, I go to LinkedIn; I want to do X, I go to Facebook). As of now, Wall Street and the vast majority of us feel that X= ‘waste time’ and until Facebook “finds its self” it will continue to be out of favor with Wall Street.