Thursday, May 17, 2012

Reality vs. the Facebook valuation -- part 46

As mentioned before, in order to justify the numbers being discussed in the upcoming IPO, Facebook will not only have to add to its huge base of users; it will also have to bring in considerably more revenue per user. For this to happen, Facebook will have to keep advertisers convinced that the data and targeting algorithms are worth the expense.

Stories like this don't help (from NPR):

CHACE: Welcome to the warehouse district of Little Ferry, New Jersey. Right above the loading dock, I found Alex Melen. He runs Melen LLC. It's an internet marketing company. And he provides Facebook likes to people and companies for about $75 per 1,000 likes.
HENN: Liking something on Facebook means you're a fan. It lets a company talk to you. So clicking that little blue thumbs up actually has value. This company supplies likes for cash. It sells them. So I go in and I say, I want 200 likes. How much?
CHACE: Right. And when you go in, it's exactly what you'd expect. About 10 guys, computers, beer cans, Red Bull, iced coffees. The oldest one there is Melen. He's 28.


MELEN: And once we find a supplier that says OK, I have the--2,000 likes or 5,000 likes or whatever the client ordered, we just place the order with that network, and then they fulfill it.CHACE: So who is it that's actually clicking the like button for cash?
PREPIS: Danny Longshanks, Camel Love, Vida, Elvis Adon, Bruce Buffalo...
CHACE: Well, it's people from all over the world who are found on work-from-home sites.
PREPIS: And if they get paid 10 cents per like, then they like it. You know, even 500, the over month total. You're making $50 a month that probably took them, in total, maybe 20 minutes to do.
HENN: Or these Likers might not be people at all. Ben Zhao is a computer science professor at UC, Santa Barbara. He says there are much cheaper ways to get a supply of likes - social bots. These are fake people controlled by a computer. Or you can buy compromised accounts.
BEN ZHAO: Right now on the black market, you can actually buy and sell bundles of Facebook account credentials, tens of dollars or hundreds of dollars for hundreds of thousands of Facebook accounts.

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