Guess Who's the World's Biggest Landlord?

Facebook Lease

Alarming, troubling and yet so ultimately predictable is the assumption Facebook will eventually charge fees for accounts held by corporates.

This is based on simple business paradigms. Leverage is now heavily weighted towards one party (Facebook) which implies the other must pay (companies). Yet those most alarming thing about this is that the corporates don't see it.

Build your own property or lease? Essentially the decision one makes when investing in a online community. A company decides to invest in building a community and either chooses to build a fresh, company-centric property or fill out the Facebook pre-determined face-o-company lookalike. Not only are corporates jumping to ride the Facebook train which (to them) ticks the right boxes and eases the expectation to social media; they are doing it at a record rate.

The landscape paints a picture of eager management rushing into a space with short term thinking. It's short because they are not assessing the landscape beyond 12 months. The networks established on Facebook are completely owned by Facebook--not the companies who service them. Which begs the question why would anyone move into a leased property and pay for the fit out without any guarantees of lease terms? Net alone pay for premium media sites selling the Facebook pages.

One can say Facebook has no intention of driving revenue from "networks management" for corporate pages; yet it's a very empty statement. Facebook is built on business fundamentals; albeit a social network with 500m+ followers. Now traded on the NASDAQ, market pressures are sure to play a significant driver in additional revenue streams. Non more predictable than that of corporate lease fees.

Has it happened before? You bet. The Chinese social network landscape is a perfect example of this. Initially China SNS accepted all willing suitors marketing a brand presence in China. It took just 3 years for the market to mature and the table turned with all existing brand pages having to pay exorbitant fees for continued hosting (Fees for a brand site on leading Chinese SNS begin at $15,000pa). Instead of competitors offering a 'free' alternative they simply all followed suit.

Lessons learned teach us to think both short and long term about 'where you see the community brand site in 2,3 and perhaps in 10 years?' following a clear vision of how you see it will determine the validity of building your own or not. Either way be ready for a new landlord.

Warren Buffet says it very well "build to own it." He couldn't be more right.

Written by Andrew Collins for the Mailman.

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