The Facebook Endgame

There is no doubting the current influence of Facebook. Myspace has stagnated since Rupert Murdoch purchased the site nearly three years ago. According to Google Trends, Facebook overtook Myspace in terms of search volume.

facebook google trends

Facebook, as currently positioned, will never become a long term tech powerhouse like Google. There is simply no way for a social networking company to make a healthy consistent profit as a standalone entity. The only viable endgame for a social networking company is to get bought out. Considering the fact that Facebook is now the undisputed social networking king, theres never been a better time to sell.

Today, Google announced a product called “Friend connect,” which allows any website to add social networking features. Friend connect is a lot like Ning, a Mark Andreessen backed startup allowing anyone to create their own social networking site.

As social networking gets more distributed, highly centralized sites like Facebook will become less relevant in the future. It reminds me a lot of the mid-90’s when centralized online services like AOL, Compuserve, and Prodigy were the big players. The ISP model shifted from centralized to distributed, and all the big providers faded away.

Considering Facebook’s current status as the clear market leader, Facebook investors would be well served by selling the company soon. Given the failed Yahoo bid, Microsoft could use a bit of good news. I’m sure Steve Ballmer would be willing to overpay for Facebook in order to appear relevant in the Internet space. Given the Google Friend Connect announcement, it would be great timing for Microsoft.

Is a quick sale of Facebook a smart move? Probably.. Will it happen? Not if you believe Facebook founder Mark Zuckerberg. He has consistently fought off the notion of selling the company. While there is certainly room for Facebook to grow further, many entrepreneurs have been stung by their own delusions of grandeur. Friendster, the pioneer of social networking, is not longer relevant.