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  • Greg Collier 1:55 pm on February 19, 2012 Permalink | Reply
    Tags: Active Users, , Groupon, Investors, IPO, Valuation   

    Facebook’s “fuzzy” math: There’s just no need 

    Did we learn nothing from the dot-com bust just a decade or so ago? Have we not learned lessons from the financial meltdown of the past few years? Or is that push for “Mo’ Money, Mo’ Money” really so strong, that we’re willing to let financial fairy tales distort our perception of what’s really in front of us. 

    I’m talking about bringing back some honesty to the world of business, some transparency that keeps companies from exaggerating their financial health and exposing the markets to unnecessary risk. Case in point: Facebook and its upcoming Initial Public Offering. 

    Washington Post columnist Barry Ritholtz had a great piece last week about Facebook and a set of non-financial numbers might raise an eyebrow of the real growth potential of the social networking giant. He looked at the way Facebook counts active users and, more importantly, how they define those users. 

    Facebook has become just as much a “platform” as it has a destination site, allowing people to interact with Facebook without actually visiting Facebook. Have you ever clicked the “Like” button at the bottom of an blog post and had it show up on Facebook? Sure, you have. But you didn’t go to Facebook.com – the actual site – to do that, did you? Consider this excerpt from the Post column: 

    Why does this user-behavior metric matter? Consider what it means in terms of how “daily users” will generate revenue and profits. If all users do is click a “Like” button, but never make it to Facebook.com, they cannot be “monetized.” They cannot be marketed to. They do not see any advertising. They cannot be sold any goods or services. They take advantage of FB’s extensive infrastructure to tell their FB friends (who may or may not see what they did) that they liked something online. That’s all that happens. So they not only fail to generate revenue for Facebook that day, but they are actually a cost. It’s not cheap to maintain that massive infrastructure of Like buttons everywhere.  

    Now, if I’m an investor, this is important to know. Once investors start breaking down this information on a quarterly basis, via public filings, these are the sorts of questions that Facebook will have to address, especially if the financials don’t meet the expectation of the hype. Companies learn those lessons everyday on Wall Street. Just ask Groupon investors. 

    Don’t get me wrong. I made a conscious decision a long time ago to run my business in a manner that doesn’t have me answering to investors. And I’m happy with the way my company has grown over the last decade, in part because of that decision. But that what was best for me and my business. I’m not here to question Facebook’s decision to go public.

    What I am saying, though, is that businesses today need to be more responsible and transparent. We’ve seen what happens to businesses when they’re less than fully honest about the bottom line, the number of users, the growth forecasts and more. Some companies only talk about products “shipped,” instead of products “sold.” I can ship a million products, but if I don’t sell any of them, I’m not making any money. 

    I guess this really gets to me because Facebook is undoubtedly a great company with amazing growth potential. Why does anyone feel the need to incorporate “fuzzy” math into it? They’ve achieved critical mass and are on a growth trajectory that’s redefining the Web, marketing and advertising and even parts of the global economy.

    They don’t need to operate in a manner that indicates the opposite, that sets them up for a “gotcha” moment by analysts, bloggers or the government. They don’t need to cloud the picture for consumers or investors or even themselves. 

    The housing market and the banking industry operated for years behind cloudy pictures and fuzzy math and look how that turned out. If ever there was a company that could be honest and transparent without compromising its potential, that company is Facebook. 

    And yet, we remain determined to repeat history.

  • Greg Collier 6:01 pm on February 5, 2012 Permalink | Reply
    Tags: , , ,   

    Super Bowl in Indiana brings tough new human trafficking laws; Other states should take note 

    Millions of eyes have been focused on Indiana for the events leading up to Super Bowl Sunday. It’s a major event for any region, with hundreds of thousands of people coming in for the big game and all of the festivities that go with it. Unfortunately, victims of sex trafficking rings are among those who arrive in cities where big events like the Super Bowl are hosted.

    But here’s a tip of my hat to the state of Indiana for really stepping up its game to send a message to pimps and johns who might be looking to solicit sex-trafficking victims, notably the underage girls who are forced into this world of modern day slavery.

    Indiana Gov. Mitch Daniels, just days before the big game, signed tough human trafficking legislation into law as a way of giving law enforcement officials and prosecutors the firing power to send a message that says, quite frankly, don’t even think about it. The new law closes previous loopholes and makes it easier to prosecute those who sell children into sex slavery rings. It also reduces the burden for prosecutors to prove coercion, which previously prevented traffickers from being prosecuted if the victim wasn’t being held against her will.

    More importantly, though, is the training efforts for non-law enforcement types, such as hotel employees and cab drivers, have received. These folks now know what to look for in a possible victim – young girls dressed inappropriately for their ages who appear to be quiet and insecure and who avoid eye contact. Likewise, they were warned about girls who fit this profile checking into hotels with no luggage. And they’re taught to understand that the victims are just that: victims, not criminals. These girls need to be rescued, not arrested.

    The Washington Post last week profiled the efforts of the religious congregations that bought shares of stock in major hotel chains so that they could be heard at the hotel executive levels about the responsibilities of the hotels in this fight. Many of the training programs were the direct result of this pressure campaign.

    For some time now, I have been sounding off to anyone who will listen about the responsibilities of online sites – including classifieds sites like Geebo – in preventing these sorts of encounters. Geebo doesn’t accept or post personals ads where these young girls are often advertised for sale. And I have personally called on my industry counterparts – notably Craigslist and Backpage – to do a better job of policing their site for possible human rights crimes.

    For the most part, my pleas have fallen on the deaf ears of my competitors. I guess there’s too much money to be made by selling those ads to be worried about the safety of innocent children being traded in sex slave rings. I can only control what happens on my site – but I’m proud to be a part of a growing effort to educate and inform folks about what’s really happening on these sites and how it can be prevented.

    This law in Indiana is a big positive push forward for our efforts – and I’m hoping that other states follow Indiana’s lead and get serious about laws that send “You’re not welcome here” messages to sex-trafficking criminals.

    Los Angeles Times: Super Bowl: Backed by tougher Indiana Law, nuns target sex trade

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