Could Facebook spend its way into oblivion
There is no denying the fact that Facebook is hot stuff. Figures have it growing from 150 millions accounts to 175 million in just five weeks. The problem is that all those numbers cost money. Money that for now is only coming into the Facebook coffers – to any serious degree – from venture capital funding because we all know that any serious attempts to monetize via advertising is failing for the most part. The fact is that for every million new accounts added to Facebook it requires close to $1 Million in capital to support those accounts.
As Owen Thomas points out in a post all these new members means that Facebook should be spending close to $5 million per week on servers and other computing infrastructure. Additionally from what can be gleaned from the company’s financials Facebook isn’t even covering the cost of its operations let alone being able to make enough profit to pay for its capital investments.
With Beacon a proven failure and reports of a change in the company’s TOS that blatantly states that everything going into Facebook belongs to them, the company could be facing some really hard times. The question is with the high burn rate of its cash reserves along with the inevitable backlash against the TOS changes – which just confirms what a lot of people; myself included, have been saying – how much longer can Facebook keep up its high flying act of success.
Where once Facebook might have been the poster child of Web 2.0 and social media properties there are some hard questions coming its way. While it might be sitting on a treasure trove of data it has yet to find a way to monetize it and nothing they seem to be doing indicates otherwise. At some point all that venture capital has to dry up and Facebook is going to have to find some way to make gargantuan amounts of money just to break even – especially if it keeps growing.
So one has to wonder if this poster child could end up spending its way into the poor house has become just another has-been floating in the deadpool.
[picture courtesy of Alexander van Elsas]
