Why Zuckerberg Will Lead Facebook To Demise
With the $100 billion dollar evaluation, Facebook CEO Mark Zuckerberg has a lot to live up to. Facebook went public on Friday with a flatline debut after years of hype, rumor, and speculation. Facebook has unjustly become the face of tech-startups; that they begin with nothing and end up with multi-billion dollar IPO's. Why is this?
Even though a generation of entrepreneurs have brought countless jobs back into the economy, executed massive returns for investors and created innovate technologies throughout the world. The majority of the public is not familiar with startup culture proper, or the business of industry in general; thus, they give credit to the only startup they know: Facebook.
Most business leaders would realize that a dubious assumption is dangerous, for all of the startup industry and their own business operations. However, Zuckerberg has embraced an unwarranted image of Facebook being the “poster boy” for the startup world. However this is not surprising since he does not have a background in business, nor does he seem to embody the traits historically associated with effective leaders.
So this is why we, along with many others, believe that Facebook will meet its end at the hands of its own founder, Zuckerberg.
To start, Zuckerberg has embraced the hype surrounding his company, which has lead to a faux sense of dominance and stability that it is not extremely dangerous. No company should ever be able to justify the $1 Billion acquisition of a twelve-man team, Instagram, that has yet to report a profit. Of course we recognize the value of a high-traffic platform that touches 50 million of users; but, Facebook has taken their evaluation into a new sector of speculation with their overzealous valuing of $1 Billion.
Now compare Zuckerberg's personal evaluation of Facebook in light of his Instagram evaluation. In fact, less than a week before Facebook's acquisition of Instagram, a Venture Capital team valued Instagram at exactly half of what Zuckerberg valued it at. It is quite possible Zuckerberg inflated Instagram's price to artificially pump Facebook's buying power. In doing so, Facebook's value would rise in terms of their purchase of Instagram.
Another reason Zuck's rule will bring Facebook to its end is their business model. With so many users and partnerships, there are many ways to capitalize on their marketplace platform. Instead, the only significant form of revenue that Zuck has decided to employ is the Advertisement. It has long been a debate on whether Facebook's ads are effective. Does marketing on Facebook actually get customers to buy a certain product?
General Motors and Proctor & Gamble are two of America's oldest yet strongest corporations; Additionally, they both happen to spend more on Internet and digital marketing than 90% of other American companies–surprising given their age. So even though both corporations understand the value of Internet marketing, they have both recently pulled their advertisements from Facebook after independent studies showed they were fruitless campaigns.
If two of America's most consistently advertised companies claim Facebook's ads do not work, then it is safe to say that many others will follow in their path. What does that say about Facebook's single most important source of revenue?
This example at least says their ads are unproven; at most this says their ads are ineffective. In any case, from a functional standpoint, Facebook is skating on thin ice. Any battle-proven CEO would get out in front of this problem, restore the market's confidence in their advertising platform, and other sources of revenue for the company; Zuckerberg has yet to do any of these.
In an attempt to push Facebook's poster boy image of startups, the company is visibly trying too hard. With nearly $16 Billion of equity raised since their IPO, Zuckerberg has begun to execute developments that have been planned for months: an app marketplace, mobile software, and an actual smartphone device. Expanding one's lateral is an essential aspect of a company's growth; but a car manufacturer cannot make tires, and vice versa. Zuckerberg is venturing into waters that are unfamiliar to him.
Why? Because of his ego. This will spread Facebook's power too thin; soon enough, people will realize that Zuckerberg is not equiped to succeed in markets like this.
Only time will tell in the end what Zuckerberg's continued “leadership” will mean for Facebook. If their recent IPO debut has anything to say, the future is not bright. Now that Facebook is a public corporation, it needs a real executive–like Steve Jobs, or a Brin. Someone who is as tech-savvy as they are business experienced. Zuckerberg is not an ideal leader, and if he continues to make the decisions for Facebook we will continue to see many disappointed investors reluctant to invest in any startup ever again.
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