Facebook IPO and the Future of Social Networking

Just in case the recent FB IPO has your wallet itchy, lets take a look at some interesting facts.


^ Zuckerberg himself invested in this project..

I’m not trying to sell you a product, but to give you a quick understanding, Diaspora is an example of a distributed social network.

A distributed social network is a really just Decentralized Computing, opposite of Facebook which is centralized.

Diaspora is just one example, you will see on the Wiki link above there are many attempting the same thing, just as there are many centralized social networks competing with Facebook.

Just a Fad?

I do not believe social networking is a Fad.

However, like all software systems it will be potentially subject to lackluster modules, stymied growth once it’s exceptionally large, and software evolution.

Now I’m not big on evolution in general.. but.. software does evolve.

If you try to think of a single example of a software system which has not evolved over time, you will find this list is very small..

What is it evolving into?

The answer to that question at best is an educated guess. But certain patterns in software systems, as well as the donation of Mark Zuckerberg to Diaspora (which is a direct competitor), hints the company may move in a more distributed direction – if not – it could risk getting left behind.

Let’s take a quick look at why Facebook is no different than these other systems.

Evolution of the Internet

Evolution of the Internet

Birth of Napster

Birth of Napster

Cloud Data

Cloud Data

High-Performance Computing

High-Performance Computing

These diagrams are obviously highly simplified, and don’t due justice to the rich history behind the growth of these systems, but they serve to illustrate a very strong theme in computing of growth through networking.

Every system that starts centralized eventually becomes decentralized and distributed. History does show that over expansion and distribution too rapidly spreads things thin, but in moderation it is a model for success.

To IPO, or not to IPO?

To summarize my overall assumption – centralized social networks will be replaced with decentralized ad hoc networks and/or the survival of social networks will be dependent on much tighter integration at the operating system level (which we are already seeing, look at the newest flavor of Fedora or Windows 8).

In investment terminology this means there may be very good long term profit to be made if FB makes the right decisions and continues to evolve at the same pace as society. This can easily be assessed over time, but is uncertain right now.

FB press releases do not seem to hint much at a distributed system or leaning heavier on tighter OS integration, and I believe these two key points to be critical to their long term growth.

Basic Risk Assessment

Stock predictions are guesses, with no promise of accuracy, but my estimation is a large majority of well funded shareholders already see the valuation of FB as a high volatility and high risk simply by considering FB’s reported revenue versus it’s valuation.

Many people are not aware that alot of these shareholders get a stake on the price of the IPO much earlier than the average joe, and in fact they inflate the price so once it is out the door it is already much higher than the stated “IPO price” you will see on the news, but never had the opportunity to get.

By the time you get to purchase, the majority % of these shareholders will be selling for short term gain. Even though brokerages and firms openly discourage this and it is frowned upon it still seems to mysteriously happen.. (look up LinkedIn’s graph on first day of trading)

In some cases this will happen so quickly that you won’t even notice, and you could quickly get pulled under the waves the second you jump in the water.

So if you want to risk holding for the long term and following FB’s growth, go for it, but if you’re trying to get rich quick, it is not likely.

Distributed Social Network (Wiki), http://en.wikipedia.org/wiki/Distributed_social_network
Fedora Project, http://www.fedoraproject.org
WebSequenceDiagrams, http://www.websequencediagrams.com/
Zuckerberg Diaspora Investment, http://www.wired.com/epicenter/2010/05/zuckerberg-interview/all/1
Windows 8, http://en.wikipedia.org/wiki/Windows_8
FB’s reported revenue, http://www.bloomberg.com/news/2011-09-20/facebook-revenue-will-reach-4-27-billion-emarketer-says-1-.html
FB’s estimated valuation, http://www.forbes.com/sites/ciocentral/2012/02/02/facebook-valuation-we-dont-know-what-we-dont-know/


About Ronnie Diaz

Ronnie Diaz is a software engineer and tech consultant. Ronnie started his career in front-end and back-end development for companies in ecommerce, service industries and remote education. This work transitioned from traditional desktop client-server applications through early cloud development. Software included human resource management and service technician workflows, online retail e-commerce and electronic ordering and fulfillment, IVR customer relational systems, and video streaming remote learning SCORM web applications. Hands on server experience and software performance optimization led to creation of a startup business focused on collocated data center services and continued experience with video streaming hardware and software. This led to a career in Amazon Prime Video where Ronnie is currently employed, building software and systems which stream live sports and events for millions of viewers around the world.

Posted on February 2, 2012, in General Discussion and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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