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#Facebook and the New Frontier


As we all should have heard by now, Facebook is going public. If you are not sure what that means, pieces or “shares” of the company can be bought and sold on the open stock market by anyone in the world – hopefully for a profit. The valuation – amount of money a company is estimated to be worth when it hits the stock market – has been speculated to be as high as $100 Billion dollars. Needless to say, that’s a lot of money folks. People all across the globe believe in Mr. Zuckerberg‘s vision of creating a more “connected” world. He is certainly doing that at an unprecedented pace that will truthfully, never be matched again in our lifetime – perhaps in any lifetime. The advertising revenues have grown exponentially, and this could be the biggest initial public offering a private company’s stock in the history of our modern capitalist society.

Still, it could be stated that Facebook’s entire business model is based off of perception, or what investors would called “perceived ROI” – return on investment. This means basically the business model that has been making a few people lots of money over a very short period of time, may not give the shareholders the same type of return over a long period of time. Without a subscription price model, Facebook’s business could eventually regress and see a decline in revenue sales dollars and ultimately profits, because what is to stop some other Zuckerberg from coming up with another new innovative way of sharing information and connecting the world over the next 10 to 20 years – a model that could redefine the way we seek out and digest products and services as consumers just as Facebook has done?

Facebook will be best served to mimic the success of some of it’s peers in regards to overcoming the pending plateau of their business model growth – an issue that all businesses face at some point. Amazon, Barnes & Noble, and even Google, have stepped outside of their traditional business models to pursue the frontier that technology consumers seem to always embrace – hardware. The success of the Kindle, the Nook, and Google’s newly developing hardware platform that will support seamless integration between Android and Motorola phones architecture is an idea Facebook should consider exploiting. Imagine a Facebook Tablet, one that supports it’s own browser and apps designed to integrate with your current Facebook account and applications. We already know Facebook has millions of applications. We can read the news on Facebook, chat with friends, video conference, play poker – what else could be next? A Facebook tablet would provide the revenue dollars and profit margin to support the advertising income from the company’s original business model as the transition through an IPO and into the next decade continues. It would also help cut into the profits of companies who are making millions of dollars indirectly, because of Facebook. Imagine if Facebook was unavailable on the iPhone, Android, Kindle, or Nook, and only available on a 6.5 inch Quad-Core powered tablet that would compete with all of the devices above as far as media content, apps, and communication capability. The Facebook Faithful might consider a switch, and the companies mentioned above to some degree, would have to play ball to satisfy the new desires of the consumer.

Some of you may say, “the next decade? 2012 just started!” What you must understand, is that when your company is private, you can follow whatever timeline you see fit to a certain extent. But when your company is owned by the public, institutional investors, private equity firms and the like, you have a lot more questions to answer in regards to where the company is going, where is the vision taking us, and why should we keep our money around during that process.

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Are you ready to completely abandon CDs? The choice has been made for you.


Today, Side-Line Music Magazine published an article, outlining the plans of major  worldwide record labels to completely abandon the CD format as we know it. The  reasons seem to be quite obvious: low demand for the traditional “album” outside of  limited edition releases and labels will spend less money distributing the album. But  does the digital download devalue the music? Does the CD, and the tape, and the 12  inch vinyl before it, offer a quality that is unmatched by simply digital consumption?  Will we further devalue music because of the ability to instantaneously access it?

One party stated that a possible upside might be the label will spend less money on  the album in total, thus allowing for less money to be recouped from the artist, and  therefore allowing the artist to generate more income from the album’s release –  wrong. The label will just allocate the “costs” to some other phantom expense on the balance sheet, probably into marketing as this fascination with the juxtaposition between social media and music continues to climb at an unprecedented pace.

Many business around the world will become defunct, with the consolidation of music distribution becoming more and more concentrated into the hands of the few, to be rationed out to the masses. These “hands” will more than likely iTunes, Spotify, Amazon, and Facebook, who has recently been inking deals with several music streaming services in order to add integration into its user account architecture. Amazon is the most interesting of the bunch, as it is currently the world’s largest CD distributor, and probably in the top 5 globally ranked online streaming services as well. This is going to put a lot of pop into this stock, for those of you interested in that sort of thing.

This transition is supposed to occur over the next 5 years, and Amazon is poised to be the basket that will hold all limited edition releases of CD albums in the not to distant future. So it seems that with the devaluation of the album, it will find itself resurrected in other forms. Clearly the labels expect to increase their profit margin on their musical product. But who is to stay the world’s heavyweight digital music companies won’t jack up the prices on the labels over time…food for thought.