Gary Kaminsky basically became a tool for the Facebook IPO by mentioning an "anonymous" report regarding Facebook's efforts within search. Its speculation that Microsoft will hand over Bing for more shares of Facebook.
If Gary Kaminsky is in the business of promoting speculation, I hope Gary can promote my blog on CNBC. That would be cool. Gary, want to give me a mention on CNBC too?
Everyone is free to speculate, so I decided to entertain this speculation to see the potential effects on Facebook.
I did an analysis on Facebook, and their potential growth, as per their filings about two months ago. With Facebook just starting to touch on mobile, there is no question to its continued near-term growth prospects. (And knowing how analytical Zuckerberg can be, I am sure he will be managing Wall Street's expectations very well. Probably Apple like.)
Below are the exact figures:
Bing is estimated to have an operational loss of $2-2.5B. That's crudely $500-625M dollars a quarter in loses. A swap would effectively wipe out Facebook's current profit profile.
We can argue and speculate the potential is big if Facebook has a real search engine, but lets be realistic for a second.
1. Google is a fierce competitor that is obviously not standing still.
2. Social search does not encompass all of search.
3. The rise of the answer engine is just as much of a competitor to the Facebook/Bing search as it is to Google's search. (The app ecosystem is a threat to this as well.)
4. Facebook has probably the worst reputation of all large web companies handling personal data. (If there was an uproar over 'Google Search Your World', there will be a challenge to Facebook's efforts too.)
5. Facebook's mobile offering sucks. Its slow, clumsy and at times inconsistent with the web version. If they are serious about search, they have to get their shit together on the user experience front.
6. Monetizing search is difficult. (Look at Ask, Bing, Yahoo, and the many other smaller engines.)
Basically, Facebook/Bing speculation, for me at least, adds more questions and concerns regarding free cash-flow and valuation of the company. Albeit, speculation on search also adds a lot of potential, but as an investor, there are real concerns here.
For me it was a turn off, but eventually even Facebook has to shift with the industry. Obviously this is where the sector is moving, and Google's efforts are proof to it.
IMO, a low-risk/high-margin strategy for Facebook is to open the platform to as many players as possible and collect a reasonable fee. (Commoditizing the efforts by the search players, leaving Facebook the real beneficiary.) But seeing how Facebook already has difficulty working with large companies (i.e. Apple and Google when the two were looking to access the Facebook platform), seems like Facebook wants to go the high-risk route.
Post a Comment