Analysis on the development path of social networking sites

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At the end of November 08, Facebook was about to buy Twitter for a 500 million dollar stake, but Twitter rejected the message. The main reason for the deal's miscarriage, according to the report, is that Twitter investors and executives question the true value of Facebook's shares. Earlier, Microsoft had invested 240 million of dollars in 1.6% of Facebook's shares, which valued as much as $15 billion, followed by the Chinese richest man, Li Ka-shing, after the same valuation, but the industry generally considered the valuation too high.

While there is no way to know the specific valuation criteria Facebook uses to buy Twitter, it is clear from Twitter's attitude that Twitter is unacceptable with a more valuable variable than a swap purchase. Facebook CEO Mark Zuckerberg said in a recent interview that the 15 billion-dollar Facebook valuation was low and that Facebook was making a new round of financing with the same valuation, according to TechCrunch, a prominent technology blogger.

This is not an agreed deal, the reason for the widespread concern, on the one hand, is that the two sites involved in the event, all of which are the heavy roles of the Internet, are the focus of the media and the industry. To avoid the cold winter, and Facebook as the eye of the U.S. companies in the storm, the market expansion of the move, meaningful.

One, Facebook's expansion

For the enterprise how to deal with the current financial crisis, once in the investment Yahoo site in the First World War fame of the famous VC enterprises, the enterprise in the current must quickly compress costs in order to survive in the winter. The view of the great Cedar venture, which is partly representative of the industry's mainstream view, and the massive layoffs of Silicon Valley and even global companies, is proof that this view is evolving from judgment to grim reality. Following semiconductor and hardware manufacturers, internet companies have also started to cut jobs, with listed companies such as Yahoo and ebay first, and smaller internet companies, such as LinkedIn, a social networking company in Mountain View, Calif., and six Apart, a San Francisco blog company, have also been laid off downsizing.

At a time when spending cuts are the best way for businesses to withstand the cold winter, Facebook is sticking to its strategy of "investing first and profit second", and insisting that expansion is not relaxing is somewhat outdated and even counterproductive. Take a look at some of Facebook's recent moves to reduce revenue targets. This summer, Facebook lowered its full-year revenue forecast from 300 million to 350 million dollars to 2.5 to 300 million dollars, in an effort to focus more on the expansion of its user base, which, of course, could be based on a strategic adjustment to the macroeconomic situation, and a greater investment in research and development. Facebook has further invested in research and development, adding Xhosa, the tower, French, etc. to suit the needs of the minority community, and the 3rd is the expansion of acquisitions. Facebook, while launching its takeover of Twitter, plans to expand its enrollment by the end of 08, increasing the number of employees from 400 to 800 by the end of 07.

Facebook's actions are intriguing in the current market climate. There is indeed an opportunity in the crisis, and, as Facebook, its expansion should have a clear direction and standards, not blindly attack, but as a still not achieve balance, still need to rely on financing to protect the survival of enterprises, this expansion of the process, there is also a hidden danger? Can it foresee and be able to defuse all possible risks? There are some unknowns and uncertainties.

Second, the myspace adjustment

As Facebook, one of the world's SNS Gemini, has focused on adjusting its growth strategy this year, focusing on profit targets, making the revenue issue a priority and has achieved some results, according to market research group comscore, Last year, the MySpace site expanded moderately, The number of users reached 118 million, while the size of the Facebook site expanded by more than one times, the number of users has reached 161 million, and MySpace has slipped from its lead in terms of number of subscribers, but according to Goldman Sachs, the strategic choice to focus on revenue growth is also a small number of MySpace users, compared with a projected 6.6 per cent annual income for 08. Billion, one of the reasons to reach Facebook twice times more.

Of course, in the MySpace growth first strategy, also did not completely abandon the desire for expansion, MySpace Co-founder, current CEO Deulf recently said that the current start-up companies are facing the plight of cash exhaustion, six months ago, some start-up companies in the value of 200 million to 300 million dollars, But now the sale price will be less than 1/10, so in the economic downturn, it is a good opportunity to acquire a start-up company. Deulf also said that MySpace was more willing to engage in mergers and acquisitions related to its core growth areas than to buy Twitter, as rumors of Facebook's acquisition of Twitter were. It can be seen that MySpace is currently looking for the right target, but only if it is related to its core growth strategy.

Three, confusion and breakthrough

As a bellwether for SNS sites, MySpace and Facebook, although in terms of revenue, have broken the billion-dollar order of magnitude, but this does not mean that the social networking site has been plagued by a profit model has been a breakthrough, the profit problem is still such a site must solve the problem, expansion or adjustment, As a commercial website, profitability is the ultimate goal. News Corp buys MySpace, Bill Gates shares Facebook, not charity, what they need is high returns. And in the profit model, advertising is still the main means of social networking sites, the two years on the SNS site to explore the most of the news is Facebook, the current Facebook's main profit model is three, (i) advertising. Facebook's advertising business has two main models, one is built-in, and similar to the portal site, directly accept advertisers on the website of the ads on the page, the second is the external transmission. Learn from the Google Advertising Alliance model, through the development of text and image banner ads, on other sites to carry out targeted. According to experts, Facebook's online advertising revenue this year is expected to be 200 million to 222 million dollars, accounting for about 80% of its adjusted full-year revenue target. (ii) trading of virtual goods. According to foreign media reports, Lightspeed Venture, an investment agency, has said that Facebook can earn as much as $34.5 million trillion of revenue this year by selling virtual gifts. This figure accounts for about 15% of total income, and its potential growth is worth looking forward to. This, has been confirmed by Tencent QQ, Tencent QQ Virtual goods trading revenue to its overall revenue contribution is great. (iii) Shared services costs. Facebook and developers who rely on their open ports for plug-in development have a revenue-sharing policy that gives them some revenue, albeit at a very low rate.

Facebook's current profit measures, in other SNS sites, are also practiced, such as the domestic Tencent QQ, network, 51.com and other sites, but also in different degrees to try advertising, virtual goods and ports open, and even e-commerce, recruitment, etc., but, No one can universal, any SNS Web site can survive the general profit model, which is the biggest social network of the current confusion.

Whether Facebook insists on the "investment first, profit second" principle, the first to consider expansion and the pursuit of profit, or MySpace's revenue-focused growth strategy, the essence of the current social networking sites in the melee and chaotic state of a search, there is no advantage and disadvantage, Just choose the direction and choice of priorities, but in the end are looking for a breakthrough, a suitable for their own revenue and profitability path. Perhaps, the social network finally did not have a standardized profit model, can only according to the different market, the different crowd localization, walks each characteristic development path.