08 February 2012 at 13:23 GMT
I am simply not satisfied with the disclosure I am getting from Facebook ahead of its IPO. The less disclosure I get the worse I have to assume the numbers are in reality.
The site's business model requires users to disclose their most personal information, but it seems unwilling to disclose much of its own.
What numbers is Facebook providing?
Facebook works with two aggregated terms: Monthly-Active-Users (MAU) and Daily-Active-Users (DAU). Currently MAU is measured as 845m and DAU as 483m. What do the numbers tell us?
The most you are able to deduce from MAU is that at some point during a month, the Facebook system has registered that a user has “interacted” with its system.
But Facebook will register a user if he or she “likes” something using the Facebook button on any random web-page. You are not even directly on Facebook itself! Would you put much value on this “activity”? I would not!
According to Facebook's metrics, ýou are also a daily or monthly Facebook "user" if you log on to another site with your Facebook login. It could be Spotify because you want to hear music – but you are not engaging with Facebook itself!
These are just two examples of numbers which are on the edge of being misleading.
Mobile usage estimate looks low
On top of this, the MAU and DAU figures include interactions from mobile phones where the user does nothing! Facebook says this is estimated at 5 percent of its traffic. I will assure you that this is at the lowest possible end of a range. The sellers are doing their best to create the rosiest possible picture of the IPO case. Always think from the point of view of the seller, who is motivated to show as much of the good stuff and less of the “bad”.
Disclosure about Facebook mobile application usage is important, as there is no revenue stream from this access point! So what does Facebook choose to provide? We get only MAU on the mobile! Facebook will not even provide the DAU on mobile - perhaps this information is not flattering. I personally would like to see more about the split of action between online, where revenue is, and mobile, where it is not.
Facebook has data, data, data. This is its living! So it can provide almost anything if it wants to.
What I would like to know
Firstly – there is a total number of registered users in Facebook's databases. So, what is this total number? How many users of the potential total number are registered in some form? (see Tradingfloor.com's previous article How large can Facebook become?) What is the number of inactive users who, for example, have not interacted in three months?
Secondly – the MAU. Each month, Facebook claims, 845m users interacted – but where did they enter the system?
Above I have punched in some wild guesses about trafic counts from "Likes" and "Logins". Just imagine I am right on some of the levels. It would mean that the number of the valuable users is more in the vicinity of 300m! Facebook, please let me know how much of your activity comes from useless counts?
This could further be sliced to show how many people are regularly logged in and how many are only seldomly logged in, as depicted in my constructed table 2.
And what is the time spent on the "real" Facebook site? Does it really have any value? Is it just a matter of getting in and out or more about using Facebook as a respirator? Where is the pot of gold hidden? Below I have entered a distribution which would be alarming.
Who are the users?
How does usage break down by age and gender? Are some sectors more active than others? Is it 15-year-old girls playing games, or is it boys? What are the incomes in each group? Can Facebook expect its most active users to be able to pay for services or products, assuming Facebook targets them with something they want?
What about a Freemium model?
The business model of Social Media is still to some extent unproven. How much profits can a provider extract from users? Quite frankly how commercial can a social media site be before users are turned off? The potential revenues from mobile are probably lower than projected, as users probably quite simply get annoyed by having their smartphone experience interrupted by ads.
Some social community providers, like LinkedIn, are using a Freemium model: most of the offer is free, but some of the content is premium and users have to pay for it. Experience so far shows that a maximum of 10-15 percent of users are hard-core followers. These are the users which drive revenue when we talk about “payments” for services.
Quick comparison to Skype numbers
I have made reference to many different numbers above but in order to put just the simplest amount of disclosure into context then see table 4 below. last summer Skype did disclose its gross amount of users, plus who its active and paying users are. Just this simple disclosure is very important to understand a company's overall business model. So where is it, Facebook?
I have taken the liberty to fill in approximations just to highlight where the number levels from Facebook could possibly be. These are merely qualified guesses. What do you think?
Personally, I would demand an extra-high premium from Facebook unless it provides more information.