Facebook's inability to controlFinally, a somewhat bearish case with a take that actually makes you think. Blankenhorn doesn't add to Facebook envy with the sky is falling claims and misguided worries that Facebook will not be able to monetize mobile users. Instead, he hits a salient point. One that would make Steve Jobs proud and Mark Zuckerberg should take, and probably has taken, note of.
mobileplatforms, will become a bigger issue. And the fate of the company, and its stock, will depend on finding an answer to it.
'You worry about the back covers, I'll worry about the front covers.'That's easily one of my favorite Steve Jobs' quotes of all-time. I pulled it from Adam Lashinsky's Inside Apple. This is what Jobs told his marketing team. In a nutshell, he was letting them know that he would take care of the important advertising. Through most meaningful parts of the process, this is how Jobs managed. It's not simply that Apple has a strong platform and beautiful products, it's that, for all intents and purposes, it gave our time's most brilliant mind carte blanche over every minor (and major) detail. Jobs demanded this. He would have it no other way. With majority voting power and, subsequently, a token Board of Directors, Zuckerberg, rightfully, set up the same situation for himself at Facebook. That's not to say Zuckerberg has not surrounded himself with excellent people. In fact, he made a move too few people give him credit for when he brought in a strong COO (Sheryl Sandberg) to mind parts of the ship he does not have the time or skills to deal with. She can keep Zuckerberg's long-term visions in check to ensure the near-term runs as smoothly as possible.
I agree with Eric Savitz at Forbes, Zuckerberg would never even consider buying the near-death experience known as Research in Motion ( RIMM). In his excellent diatribe against the UK newspaper that floated this shallow rumor, Savitz notes:
And let's not forget that Facebook has close ties to Microsoft, which is making a new push into smartphones with Windows Phone 7, and which was an early investor in the social network.If anything extraordinary happens in the mobile space -- outside of advertising -- involving Facebook, expect Microsoft ( MSFT) to be party to it. It's no secret that Microsoft is banking on the forthcoming cross-platform Windows 8 to challenge Apple and Android in the smartphone and tablet spaces. There's no better combination than Microsoft and Facebook. I would expect nothing less than Microsoft making sure Facebook receives prominent placement on all Windows 8 devices. Right around this point, Blankenhorn's more than credible story has a hole. So, Facebook is merely an "app" on an iPhone. Until somebody comes along with something that people prefer over Facebook, it really does not matter. Facebook lacks control over somebody else's smartphone platform. Understood. But, there's no immediate or even mid-term negative impact, especially if Facebook forms an air-tight partnership with Microsoft and hardware makers such as Nokia ( NOK). What will Apple do? No longer offer Facebook as an app on its devices? Not in a million years. That would be a suicidal move. Imagine the outrage if, all of a sudden, you could no longer access Facebook, via an app, on your Apple device or any other smartphone or tablet, for that matter. It would be unprecedented. Social media sites, including Facebook, would explode with vicious and frenzied complaints. Again, until somebody comes up with something better, Blankenhorn makes what amounts to a moot point. While I cannot speak for him, many others who question Facebook's valuation and such underestimate the power of what it continues to build. Fellow TheStreet contributor Richard Saintvilus sums up the hold Facebook has on the world quite nicely:
Facebook's brilliance is that is sells the psychological condition known as "approval." This is the very essence of "social networking." Fundamentally, people want to be "liked" and they want to be received. How many times have we logged on to our Facebook pages just to see if our last comment or picture was "liked" -- and if so, by how many people? Essentially Facebook has become the electronic version of "word of mouth." The question is, can Google figure out a way to (if not) take away that advantage, but raise its Google+ service to match this social need?With Google+, Google ( GOOG) is nowhere even close to taking serious steps onto Facebook's turf. For better or worse, the public pigeonholes Google as a "search" company. That's not going to change anytime soon, if ever.
Saintvilus argues that Google should buy Twitter. I think he misunderstands exactly what Twitter is building. It's less of a social network between friends and acquaintances and more a utility that allows the world to share meaningful (and sometimes not-so-meaningful) information. There's a real distinction between the two services many people miss. They can easily and happily co-exist and take over large parts of the world together. Like Twitter, Facebook is a global phenomenon. According to Nielsen , it had more active audiences during the month of March in Brazil, Italy, Taiwan and New Zealand than it did in the U.S., the UK and Germany. In its most recent S-1 filing Facebook reports 901 million monthly active users and 526 million daily active users worldwide. That base continues to grow at a rapid clip. Just because Facebook is no longer new to much of the world doesn't mean it is a fad. Quite the contrary. Mark Zuckerberg made Facebook a normal part of many people's everyday routines. The fact that so many people take it for granted only speaks to his brilliant and very much ongoing accomplishment. I believe in considering bear cases. You really cannot be a successful investor unless you do. That said, most of the bear cases I have read underestimate the power of Facebook and Mark Zuckerberg. That's a dangerous thing to do.