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Entertainment

The Future of Facebook

By , May 24, 2012

Several friends asked me for advice before Facebook's recent IPO. It is not my habit to give financial advice so I probably saved them quite a few bucks by refusing to tell them if they should or should not buy Facebook shares. However, I did tell them my opinion on the potential of Facebook's business model.

In many ways, Facebook is now a platform (for games, movies, music, etc.) rather than a product; and it is only partially monetized. Users increasingly access Facebook on mobile devices as the social network's mobile version is hardly monetized at all. This is certainly a threat but it is also a low-hanging fruit for Facebook as it seeks to increase monetization of existing users. Social games will get better over time and already are more complex and more polished than they used to be. Monetization (via virtual items) will improve as games have increasing success with demographics that already play games (and spend tons of money) on other platforms. Checking/updating social networks is one of the top activities done on tablets and smartphones while watching TV. Social networks are poised to have an impact on the whole entertainment industry by allowing users to make recommendations for TV, movie, and music content, thereby helping with discoverability of online and offline content. While this is not currently being monetized, it is certainly a potential source of revenue as networks become increasingly worried about users DVRing content and skipping commercials.

On the flip side, the connected world moves fast. Facebook's ability to innovate and to remain a "cool" web destination will determine its viability and profitability in the long term.

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