Friend Suggestion. Facebook, the unlikely ally for the humble PC.

There’s been a lot of debate about Facebook’s valuation, exacerbated by the fact that the shares fell sharply on both days following the IPO.  Of course, what something is worth is primarily a factor of what someone is prepared to pay.  But people like something concrete on which to make a valuation, and unfortunately Facebook’s price seems based on the prediction that it will grow revenues and profits massively in the next few years.

To justify its price,  Facebook really has to start making big bucks. Yet, despite speculation of future revenue in its social graphs and personal profile databases, right now, Facebook makes a comparatively small amount of money through revenue share agreements with app developers, and the majority from acting as an advertising platform.  Nothing else.

In light of the IPO, the press has been highlighting Facebook’s slowing revenue growth and drawing our attentions to its debatable advertising models including Sponsored Stories.  Besides the moral and privacy arguments of Sponsored Stories, it also happens to be Facebook’s only form of mobile advertising available.  And that’s the big issue.  Mobile users of Facebook have come to expect free and instant communication that the social network is struggling to present effective advertising on mobile devices without really annoying the user.  There just simply isn’t anywhere to display them.

So with pressures of profit and challenges in mobile advertising, Facebook might find a new friend in the passé PC.

The image of the poor PC has been suffering for some time.  HP, one of the largest producers, even announced that they were pulling out of the PC market before making a dramatic about face, and there are plenty of stories that with the move to mobile technology, the PC is dead.  But that can’t be true.  Mobile devices are great and have brought us new ways of working – but they’ve not really replaced our need for PCs.  Anyone who thinks a standard office is going to move wholesale to tablets and other mobile devices in the near future doesn’t really understand how most business interact with their software.

However, for Facebook, the PC has lots to offer over its smartphone and tablet counterparts.  Speed, storage and importantly screen space, where advertising can un-intrusively co-habit (well, it’s less annoying anyway) alongside our personal social networking activity.

So, at least in the medium-term, Facebook has a vested interest in ensuring that there’s still a place for PCs amongst its users and is likely to want to try and increase our 10.5 billion minutes* we spend a day on its website over its mobile application.  If that’s a combination of limiting the functionality of the mobile app or giving us more reasons to visit its website, it’s all good news for a potential resurgence of PCs.

Hmm, how’s the share price in Dell looking these days?

*Source – http://www.zdnet.com/blog/facebook/105-billion-minutes-spent-on-facebook-daily-excluding-mobile/11034

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Adrian Polley, Director

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