Facebook – what book value? Don’t take it at FaceValue!

The news is out that Facebook is in the throes of a severe management crisis. Five of the top managers have left, including co-founder Dustin Moskovitz (October 3 2008) who has taken with him star engineer and ex-Googler Justin Rosenstein (see here Bit-tech.net news or on cnet.com). Prior departures over the summer included engineer Matt Cohler and COO Owen van Natta. The site is losing money and funding has dried up. The ambiance, conditions of work and, worse, strategic direction at Facebook are seemingly awry. The Microsoft investment ($250 million for a whopping 1.6%) and valuation ($15B for the entire company) is now looking sour and, given that we are in the vortex of a global financial crisis, you have to wonder what is going to be the right valuation if/when Facebook gets bought out if it does not go belly up (or should I say Face Down). See here for the report from Wall Street Journal WSJ Article or en français from Le Monde. Here is an analysis on why Facebook is foundering, from Valleywag.

Meanwhile, does this “flight from Facebook” put into question the value of social media?

My opinion: absolutely not.

Social media platforms are, without a shred of doubt, a great innovation for individuals of any age, all sorts of clubs & associations, and even companies (for their employees). Of course, there are some better practices that are advisable (relating to personal marketing, long tail issues, professional vs personal space…). Gartner analysts, Anthony Bradley and Nikos Drakos, touch on some of the important “how to’s” for a company wanting to integrate social media into its business. Read the article by Tim Ferguson on Management @ silicon.com.

If there is a true value for a member to belong to a social media network, which I believe is the case, then there will be ways for social media companies to create sustainable economic businesses. Targetted advertising on Facebook is effective and affordable — and as a Facebook user, to-date, I have never felt “violated.” But, they have clearly not managed growth well…

The challenges at Facebook reflect issues which are, at heart, proper to any traditional business (management cohesion, strategic alignment, cash flow, capitalization, growth issues, etc…). In the current economic crisis, there are likely many other businesses — that have even more robust business models — that are going to hit the wall. There will be no prisoners. In the meantime, it will be interesting to see who are your real friends in this perfect financial storm that we are all experiencing!

My take? Great opportunity for marketing companies to get some good advertising rates.

And, who is going to come to Facebook’s rescue?

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