AgVoice | Facebook Bubble: From Hits to Likes

Internet stocks have always been Wall Street's brightest stars. Recently, social networks have dramatically upped the excitement.

Goldman Sachs valued Facebook at $50 billion by investing $500 million in it early this year. Since then, debates have raged around Facebook's incredible valuation and that of similar companies including Twitter. The maths seems easy. Facebook has roughly 500 million users. A $50 billion valuation means every user is valued at $100.

Given the rapid rise and equally steep fall of social networks such as Orkut, Myspace and Friendster, doubts around these billion dollar valuations are understandable. An internet bubble isn't a new phenomenon after all. Remember when AOL, a dotcom darling, was valued at $150 billion post its merger with Time Warner in January 2000. Eventually, AOL turned out to be hugely overvalued. Its users moved briskly to other service providers like Hotmail and Yahoo.

Some things don't change

Crazy valuations aren't the only similarity between the dotcom boom of the early 2000s and today's social media frenzy though. The "hits" of those days are today's "likes".

"Hits", a measure of the number of client requests made to the web server, was a term which was more misused than used during the dotcom boom. It was a weapon to attract investor money and advertisers. Similarly, "likes" (or number of fans) you have acquired on a Facebook page is the metric to measure a brand's success today. While the number of fans is an important measure for any Facebook page, it's bound to fail when used as the sole currency to calculate brand reach.

Today, the race to gain your first 100,000 fans is what drives brand marketing on Facebook. Let me take these two recent examples.

An FMCG brand manager goes to an agency and asks, "My competitor is at 300,000 fans on Facebook and I need to beat them". The agency owner asks, "What's your content strategy?" The brand manager responds, "I don't know, we've got three

Pradeep Chopra is the CEO of Digital Vidya, India's premier social media training company and one of the co-founders of dvBytes, a social media service company. He can be reached through email at pradeep(at)digitalvidya.com and on Facebook at https://facebook.com/pradeepchopra.