Tuesday, June 5, 2012

James "The Wizard" Altucher Responds to Analyst View that Facebook will Disappear

I sent the following email to James Altucher at 8:17 AM this morning:
Hi James,

The Erick Jackson in the clip says Facebook will disappear in 5 to 8 years. Any quick thoughts on his view? I would love to run a paragraph or two from you on it.

At 8:21, (three minutes later!), I received this four paragraph analysis from James:
Eric is a smart guy and a friend and has been a great analyst on a lot of stocks (Yahoo, for instance, he called perfectly).

But Facebook I think is too entrenched. It's not a MySpace which capped out around 100mm users and was mostly US. FB has One billion users, users in every country, and the particular dynamics of advertising on Facebook are unlike any other medium. Let's say you advertise (i.e. spend money) on FB to get a "fan" for your company's fan page. Now you can market to that person for the rest of his life FOR FREE, as opposed to any other medium where you have to spend more money to keep the engagement potentially going.

Then there's facebook credits, payment systems, games, mobile, etc. And imagine when they start monetizing the Like button through an AdSense type ad network. And finallly, imagine when they start building a realtime search engine. There's too much potential that hasn't been used and (unlike Yahoo when Eric was analyzing it), the FB management team is smart enough to make these things happen and succeed.

Also, very important to note: average minutes per month per user on Facebook is more than the next five websites (including Google, Yahoo, etc) COMBINED TIMES TWO. So engagement on Facebook is off the charts better than any other website in territory. We are in uncharted territory. And it's going to stay that way.

UPDATE James emails:

Interesting. There was a comment on twitter but I'm not going to correct. He says that "LIke" pages are complaining because they have to pay to reach their users now. 
This is not correct.  
When you post to facebook, on average 16% of your audience will see that post. Some of that depends on what facebook calls your "edgerank" which is similar to google's pagerank. 
After three hours, depending on your edge rank, your post is gone from the timelines of almost all of your facebook fans.  
Paying will force the content to last longer and go on more of your fans timelines. So its an additional ad unit that Facebook JUST rolled out a few days ago and it only increases the benefits of having fans.  
A comparison might be CNBC on brokerage floors. Its almost always on mute. Imagine if an advertiser can pay to un-mute a TV. That's what this ad unit is. 


  1. How does he know it will stay this way? I have already grown tired of Facebook and have left. Many others I know are thinking or doing the same thing. It used to be fun to see what others are always doing and it used to be fun to tell others what I am doing. It no longer is though.

  2. I think James is a great guy. I love his blog and writings, but I think he is way off when it comes to Facebook. I've been a social networks’ user for the past 10+ years. I created my very first SN profile 2 full years before Facebook was created at Zuckerberg's dorm room. I started using a social network about 6-12 months before even Myspace was launched. So I've seen (and used) them all - you name it.
    And here's the thing. This so called 'Billion dollar users' argument doesn't really matter. Sure, Facebook is getting new users daily, but if you think about it, so does Internet itself. Back in 2000, only about 400 million people used Internet worldwide. By 2005, the number of Internet users had grown to 1 billion. Last time I checked, it was at 2.3 billion now. So the number of Internet users is (more than) doubling in every 5 years. No wonder Facebook has a billion users. But in percentage wise, it’s not really THAT big of a deal.

    Here’s a true story. Back in 2002, a social network site was created in a small European country. Within the first 3 years, it attracted over 350,000 users – an astonishing 53% of the Internet users in this country (FYI, today about 43% of Internet users have a Facebook account). The site had all the success Facebook has today. It ranked first in everything James Altucher mentioned (including average time spent on the site). And then a few years later half of it got sold for 2.5 million Euros (giving the site a €3 million valuation). Oh, and this site had an excellent way of getting money from its users. It was a clever (yet totally involuntary) scheme involving text messages. They got a couple hundred Euros from me for sure. This is the only social network in history who got its hands on my money.

    Anyway, this huge site.. it just died. It’s still there and got some users, but it a Yahoo!. People just got tired of it, so a majority of them closed their account and moved over to Orkut. And then Orkut rocked for a few years, until people moved again. This time to Facebook. But over the past 6 months or so, I’ve noticed the same people-are-ready-to-leave pattern again. Facebook has received the worst feedback out of the all sites my friends have used over the years. It is just too noisy and full of nonsense (all those Farm games, annoying apps, etc). A lot of people have removed their personal information and photos in recent months. Some have closed their accounts. This is how it has began in the past. At this point they have nowhere to go (Google+ sucks), but once something new and cool comes up... they will go (unless Facebook comes up with something awesome).

    1. BBH wrote: "Facebook has received the worst feedback out of the all sites my friends have used over the years. It is just too noisy and full of nonsense."

      Last January I wrote the following to a friend: "I still don't really get what all the hoopla is regarding Facebook. I don't see any worthwhile features in it. During my snooping around last week, I came to the conclusion that it is a complete mess, as far as design and logic go. It is a travesty of disorder and half-thought-out and/or poorly thought-out features to my picky, perfectionist eyes. It's 'message board' is very confusingly (poorly) designed, to say the very least."

  3. Altucher's comments sound studied and savvy, but laced with hubris. I learned from Mises that human action is unpredictable; as the newness of Facebook grows stale, it's difficult to know whether the apparent loyalty of it's users will remain, and even if they do, will the earnings of the company continue to grow? Who can know this with any certainty?

  4. I have noticed young people leaving fb for twitter lately. I mean high school and college age in droves.

  5. Are dis-activated accounts taken off Facebook's user count? What about the countless multiples, how are those counted? I often keep a window or tab open to FB while I'm on other things, does this count toward minutes spent on the site?