Facebook’s IPO doesn’t have to be the end of Silicon Valley

I saw a story on Slashdot this weekend writing Silicon Valley’s obituary at the hands of the Facebook IPO. The logic is that since social networking is an easier path to riches than traditional science, people will choose social networking.

In the short term, he may be right. But in the long term? The Facebook IPO looks more like Dotcom 2.0 to me.

Fifteen or so years ago, there were several next-big-things. Netscape. Ebay. Amazon. Cisco. AOL. But for a time, the fastest way to riches was to tack .com onto the end of your name (an “e” on the front was optional) and do an IPO, or a spinoff. It didn’t always work–I don’t think anyone is lamenting evacationbibleschoolstudies.com, and yes, someone did try that–but for a time, it was a fast path to riches.

It lasted a couple of years. When investors realized a lot of these companies didn’t have a way to actually make money, their stocks tanked.

I see more parallels between Ebay and Facebook than any of the others. Ebay grew explosively as the Internet grew, because people realized they could buy literally anything online. So everything they ever wanted was available at auction, and the excitement built every year, as more and more people bought their first Internet-capable computers, got online, and discovered it. It was like selling addictive drugs, only completely legal. And Ebay grew year over year, until the novelty wore off and everyone who was going to discover the Internet discovered it.

Now Ebay is trying to figure out how to avoid adjusting to just being a steady income company rather than a growth company, because its investors want it to be 1999 forever.

Facebook is still in that novelty phase. I visit a few times a day, because I can spend a couple minutes there and see what all my friends are up to. And I can talk to friends like I would over e-mail, but it’s less cluttered.

And right now, since it’s successful, it has a target on its back. Like Steve Blank says, other people are going to try to copy it. Maybe they’ll succeed and maybe they won’t. Ebay spawned a million imitators, few of which survived more than a couple of years. But Facebook itself is an imitator. The first successful modern social network was Myspace, and if you look at the dialup online services–the stuff that predated AOL–weren’t those really social networks at heart?

It’s going to seem like easy money. But eventually, the prospectors in this gold rush are going to realize that only a few of them are going to be successful long-term. Some of them will launch things that will be successful for a while and then go bust. Others will launch things that never become successful. And then what?

My best guess is that those who have the chops to do it will go back to the old-fashioned ways of making money.

Steve Blank argues that old-fashioned things like life science are hard. But so was the Internet and social networking will prove to be little different. A drug only lasts 10 years, but if it works and does something that people need, it’s almost a guaranteed 10 years. Facebook could prove to be as enduring as NBC, or it could fall to the wayside like Netscape, which didn’t even last 10.

And patents last 17 years, which is even better.

Some of those bright minds will go back to designing other things. It’s less exciting, but it’s safer. And besides that, somebody has to keep making the stuff that advertises on Facebook.

If you found this post informative or helpful, please share it!

One thought on “Facebook’s IPO doesn’t have to be the end of Silicon Valley

  • May 21, 2012 at 10:43 pm
    Permalink

    Flashback to Compuserve and BBS days…

Comments are closed.